Monday, January 14, 2013

We have a spending problem - the President's Press Conference on the Debt Ceiling

In 1995, the federal government spent just over $1.5 trillion with a GDP of more than $7 trillion.   Our deficit was $164 billion ($246 on inflation adjustment).   Last year our deficit had advanced a bit, to $1.1 trillion.   So in a bit more than 15 years, the deficit is close to what we spent for all of the federal government just 15 years ago.

In a feisty press conference today the President argued that "we are not a deadbeat nation" and that the Congress should adopt the new debt ceiling, pronto.   The President seems to think that all that polling on deficits does not matter.   The American people understand that you can just keep increasing your credit limit.

But let's use some logic here.  Assume for a moment that we were a family rather than a government.   And also assume that one in the family spent in the same way that the government has.   We ran up the credit card and the outstanding credit balance has reached its limit.  Does the family simply keep increasing its line of credit?  Of course not, while they probably try to increase their income some, the first solution for spending gone wild is not to increase credit.   Even with all the dough that the fiscal cliff produced(and all the extra spending that the deal actually produced), you can't match the dark blue (outlays) to the light blue line by increasing the light blue line.   We need to get back to fiscal balance.

You've seen the CBO chart on the left before but it bears repeating.  We have a spending problem.   In spite of the claims made by the President today, the way to solve that problem is not to let him demagogue the debt ceiling issue as if it did not matter.   It does.

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