Fire Hose Spending

President Obummer is leaving office the way that he came in... with crushing increases in our federal debt ... see: CNS News Article and above chart. Our national debt increased in just-ended fiscal 2016 by $1.42 trillion, compared to his first year in office, 2009, when our debt increased by $1.89 trillion ... driven mostly by an over $800 billion stimulus package. However, this current $1.42 trillion debt increase compares to a projected deficit for fiscal 2016 of $590 billion. Should not these two numbers be the same? Very perplexing ... especially since we are living a public relations lie that it is the size of our national deficits that count toward our fiscal prudence ... when it is really the growth in our national debt that counts most in judging our degree of peril.

Moreover, the difference is that in 2009 there was a rationale for all this fire-hose spending ... to help pull the United States out of the great recession caused by the housing bubble bursting. Now this country, theoretically is not in extremis, so why is our debt growing almost as rapidly ... and why is there such a disconnect between our deficits and the change in our national debt? I have found one brave soul who has tried to rationalize this difference ... see: Wolf Street Article. The possible explanations given therein ... from hidden defense spending to the Social Security surplus ... cannot account for this huge 2016 disparity of $830 billion between our current deficit and our increase in our indebtedness. This article concludes with no real explanation.

However. I think I might have the answer ... and that, like most roads to fiscal hell, is fuzzy accounting. By this I mean that our federal government has not established hard and fast rules in how to apply cash versus accrual accounting methods ... see: The Hill Article. So, as a result, different government agencies use whatever method is most advantageous to their spending desires. They can and often do spend cash on things (both needed and unneeded) and don't enter it in the books as an accrued expense until subsequent fiscal years ... or, less often, do the opposite. This is how our government could increase our debt by $340 billion in one single day last fall. It had accrued expenses until Congress passed the debt ceiling increase ... and then booked all this as cash out of pocket on the debt ledger. And, since these accrued expenses were not required to be shown under existing deficit cash accounting methods, they were hidden from Congress and the American public.

This is an insane way to run a government ... particularly one that can't seem to shut off the fire-hose spending hydrant.

Afterward: I realize I didn't address the second part of my query ... how come the $830 billion 2016 fiscal year disparity between our reported deficit and the increase in our debt? Perhaps the $150-$200 billion we gave to Iran may be part of this delta?

The Debt Ceiling

Now that going over the fiscal cliff has been avoided through a tax rate increase on big earners, the next national financial crises are two-fold.  First Congress must address the increase of the debt ceiling sometime over the short term … and secondly, there is a massive mandated sequestration of government spending that was originally attached to the fiscal cliff legislation and has only been postponed by two months … see: CNN/Money Story.  It seems that the Republicans, with their typical political tone-deafness, have decided that they will stand and fight their spending-cuts battle on the field of the debt-ceiling increase.  Stupid them!

Why would conservatives fight such a battle over the debt ceiling when they know that they will be forced to surrender for no other reason than to maintain the bond rating of the United States?  In such a fight Republicans are obviously at a strategic disadvantage.  However, in a fight over spending sequestration, the Republicans hold the high ground.  This is because, by doing nothing, the administration will be forced into significant spending cuts because it no longer has the leverage of threatened tax rate increases.  Yes, these spending cuts are also very painful for the Defense Department … but I am reasonably certain that the Obama Administration will politically find a way to ameliorate those particular spending cuts … with the happy assistance of the Republican House of Representatives.

So the Tea Party members in Congress need to acquire some more political savvy and choose their pugilistic arenas somewhat more carefully ... and it should not be the debt-ceiling fight.

Butter for Guns

For those of you who voted for Barack Obama three years ago, he promised that he would take this country in a new direction ... and he very clearly has.  Just when the Chinese are deploying missiles which can take out our aircraft carriers from 1,800 miles away (see: Washington Times Story), The Barry and his hand puppet, Leon Panetta, are cutting $500 billion out of our Defense Department budget ("guns") over the next ten years (Jimmy Carter redux).  These are not cuts from projected spending (called "baseline-budget" cuts), but these are real cuts ... that go far beyond the cutting of fat and means the atrophying of our military muscle.

Now contrast this with the fact that the Obama administration is poised to ask for another $1.2 trillion increase in the U.S. debt ceiling  (see: Wall Street Journal Story) ... only five short months after the debt ceiling was raised by $2.1 trillion this past August (see: Bloomberg Story) ... an increase that was implied to last the United States Treasury through this year's elections.  Since we are now totally out of Iraq militarily, these debt ceiling increases are clearly and mainly meant to cover the cost of Obama's vast social-program spending and government expansions (known as "butter").

My spider senses are even beginning to suggest that Obama is now trying to rush through many of his radical structural changes to our government ... in anticipation of his being booted from office this coming fall.  So, the question that now presents itself is: Over the next ten years or so, is the United States going first to expire from the hardening of its arteries from all this social-spending butter ... or be forced to kneel and lick the scaly feet of the Dragon of the East due to our lack of the necessary military might?