Fire-Hose Spending

The current United States government is addicted to profligate spending.  It is behaving like a young tyke in a candy store without parental controls.  In the first five months of fiscal 2013 (begins Oct. 1^st, 2012) our government spent $30.5 billion more than in the same period of fiscal 2012 … see: CNS News Story.  If this rate of fire-hose federal spending continues, our deficit for the entire 2013 fiscal year will increase by $73.2 billion over last year’s number.  This would take our deficit for 2013 to $1.400 trillion instead of its budgeted number (in Congress’s continuing resolution) of $901 billion (see: Federal Budget - FY 2013).  This would mean that the Obama administration would have overspent its credit card limit this year by one-half a trillion dollars! 

Now, even with the recent $43 billion spending sequester, I think that it is well-neigh impossible for our Administration spendthrifts to meet the budgetary goals that Congress had established for them.  And I also suspect that much of the current well-touted spending cuts are just desperate Administration attempts to get back on the track set for them by Congress last year … and blaming these inflated cuts on the sequester.  Neil Cavuto’s green-eye-shade people (from Fox News) have already estimated that, if all the spending cuts being advertised by Obama were to take place, they would add up to ten-times even that phony $85 billion sequester amount.  Q.E.D.

Yes, if the Obama Administration pares back second-half spending by even close to a half a trillion dollars, we surely will go back into a recession (blamed on the Republicans, of course).  And if it doesn't meet it budgetary constraints, it will have some serious explaining to do late next fall.  Little Timmy Geithner got out of town just in the nick of time.  

This cannot all end well.

Afterward:  I keep asking myself why did our government so overspend in the first half of this fiscal year?  Were they setting the Republicans up to be blamed for the humongous cuts they would have to make this spring and summer?  My wife suggests that they were perhaps greasing the skids, money-wise, for a Democrat victory in November?  Maybe a bit of both ...

After-Afterward:  What I didn't account for in the above analyses is the additional revenue that would be coming into the government due to the three tax increases that occurred at the start of this calendar year (to a 30% rate on earners over $400,000, Obamacare taxes, and a 2 percentage point increase on payroll taxes).  I can't imaging that these three tax increases total more tan $100 billion for this fiscal year (see: Wall Street Journal Article) ... so we still have around a $400 billion nut to crack.

New Year’s Resolutions

1)      I’ve decided to stop calling President Obama “The Barry” … like we call Donald Trump, “The Donald.”  This is clearly a disrespecting appellative.  From now on, I occasionally might call Obama “His Royal Highness.”
2)      I will offer to drive any EBT card holders who have “lost” their EBT card to the Massachusetts state center to receive a new EBT card … as many times as are required (but no more than five times a month per holder).
3)     I will not “fudge” on my tax returns this year as I herein resolve to help His Royal Highness pay for his many lavish vacations, White House celebrations, and golf outings..
4)     I mean to keep my non-conforming political thoughts to myself … and only those discontents who read this blog.  At parties and other social gatherings I will echo the MSNBC talking points (especially Al Sharpton’s).
5)      I plan to lose 55 pounds by strictly following Michelle Obama’s diet regime = waygu beef, peacock tongues, and caviar (of course paid for by U.S. taxpayers.)
6)      I intend to install solar panels on my house’s roof and refuse any associated tax credits … and not laud it over my global-warming denier friends.  I also intend to exhale only half as much in order to reduce my carbon footprint.
7)      I will rent every Michael Moore DVD ever made and watch them over and over until I am converted fully to his warped way of thinking.
8)      I shall denounce my desire that the U.S. balance it’s fiscal accounts and will publicly revile anyone who does … feeling that our national debt is inconsequential at best.  This includes placing an iconic statuette of Little Timmy Geithner on my mantel.
9)       I no longer will watch anything on Fox News.
10)   I intend to start a "Hillary in 2016" political action committee.

What Are the Chances ...

that the Federal Reserve Bank will initiate a third round of Quantitative Easing (QE3) anytime soon?  The New York Times weighs the pluses and minuses in a thoughtful analysis (see: NY Times Article).  Basically quantitative easing consists of the Fed issuing more debt and, simultaneously, buying it up so that more money is placed in circulation.  This makes the stock market go up, drives down interest rates even further, and weakens the dollar.(which seems acceptable since the dollar has been kicking the Euro's backside of late.)

However, the Fed is just one horse in an economic troika team that includes the fiscal side of the federal government and U.S. industry.  These other two horses are clearly not pulling their weight ... the administration and Congress because they are locked in a cage-match fight over whether Keynesian economics will ever work (it won't) ... and U.S. industry because it sees the new-taxes cliff looming in January and a much smaller chance that Obamacare will vanish (also add a hostile-to-business Obama administration).

My guess is that there is a strong possibility that the Fed will pull the lever on QE3 no later than its September Open Market meeting for no other reason than it too is a political animal (as we recently discovered the Supreme Court to be).  Fed Chairman Bernanke (and his sidekick, Little Timmy Geithner at Treasury) want to keep their sinecures and there is almost no chance that they will if Romney is elected.  Therefore, despite QE1 and QE2 not really pulling the U.S. out of the financial doldrums, Bernanke will force through QE3 to at least give Obama a fighting chance for four more years.  This is all The Barry will need to pulverize fully the U.S. economy.

Deleveraging

Deleveraging (the reduction of borrowed money) is now what is happening in much of the world.  Many countries, mostly in the developed world, had gone on a borrowing binge to the point of severe pain.  Even though it is a year old, this CNBC slide show is eye-opening insofar as pointing out which nations are the world's biggest debtors as a percent of their GDPs ... see: Biggest Debtor Nations  (begorrah hint, Ireland is way out in front). And, if the United States Federal Reserve Bank had not led other national banks in keeping interest rates artificially low, the moneys of the free world would already be spiraling out of control into hyperinflation. 

In other words, the spending binges that these western governments (including the United States) had been on are unsustainable and the only two solutions are deleveraging through extreme austerity ... witness the resulting riots in Greece and England ... or Weimar-style hyperinflation.  The Standard and Poors downgrading of the sovereign debt of the United States is one indication that a tipping point in this process has been reached.  (One wonders, after viewing this slide show, how France and Germany have escaped this same Standard and Poors downgrade from their AAA ratings.)

Nevertheless, the U.S. has only two real Hobson's choices:
1) Listen to the Tea Party folks and stop the spending binge that we have been on for the last decade (and, maybe, overhaul the tax system when this economic slowdown is over), or
2) Keep printing money until bread costs $1,000 a loaf.  (The day after the recent $400 billion debt-ceiling increase, little Timmy Geithner wrote checks for $239 billion ... 90% of which were cashed by Ben Bernanke at the Federal Reserve Bank.  In other words, we printed that much money in one day -- a very good start toward Weimar.)

The question now is which way do we go?  Do we inflate our way out of our rapidly growing debt morass?  Or can we rein in the tax-and-spenders whose only vision extends through the next election?  (I do think that the only real difference between these options is that the pain of austerity is felt mainly by the younger population whereas the pang of hyperinflation is felt by us oldsters.)  Seeing the recent lack of real political will in this country ... and the degree to which the Tea Party is being castigated by the main-stream media ... my (rapidly devaluing) money is still on the former option -- hyperinflation.

Yes, hyperinflation will be painful ... just as painful as austerity measures ... if not more so.  But we are a democracy and our people, in their childlike naivete, get to pick their poison.