Tuesday, December 25, 2012

The Fiscal Cliff - Phony Baloney Washington Deal

All of the options on the table in Washington DC to deal with the Fiscal Cliff are just plain phony baloney.   The US will borrow, tax and spend more than $60 Trillion in the next ten years.   If the current trajectory continues, which will lead to national bankruptcy and insolvency, long before, of this $60 Trillion, more than $20 Trillion is likely to be borrowed and added to our current $16 Trillion National Debt.   Of course, the markets will never allow this to happen.   The financial collapse of the United States will occur long before.

We are already spending about $220 Billion a year on interest on the Debt and that is with very low interest rates.   When interest rates go up, as they surely will, interest on the Debt will exceed and crowd out all other major expenditures.  In fact, it is estimated that by 2020, the interest on the National Debt will exceed a Trillion dollars a year.   This will be about 20% of all government expenditures.   This is unsustainable by any measurement. 

So the deals being discussed in Washington DC to deal with the Fiscal Cliff will do nothing to address any of this.   Obama is pushing for about a Trillion dollars in new taxes in the next ten years on the "rich", enough to fund the government for about 8 days a year.   Republicans are pushing for about a Trillion dollars in spending cuts in the next ten years.  Even if this $2 Trillion was there to impact federal spending in the next ten years, it is a pimple on an elephant.   This is $2 Trillion, out of the likely $60 Trillion that will be borrowed, taxed and spent.  

This represents a cut in spending of just $100 Billion a year out of the $4 - $5 plus Trillion dollars that will be spent each year in the next ten years.  This is less than 2% of overall spending, peanuts in the big picture, that will do absolutely nothing to end deficit spending and deal with the National Debt.   As such, all of the deal options being discussed in Washington DC by Socialists and Republicans are phony, baloney.   We are on a speeding, out of control train to national bankruptcy with no conductor in the engine room. 

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