In recent weeks, the Administration and Congress have been at loggerheads with the issue of doing something constructive regarding the economy. The reason is not “petty politics” (as spouted continually by the Mainstream Media) but profoundly different beliefs in what is good for America. The Liberals/Democrats/Progressives believe government must help lower income segments, largely by augmenting government “social justice” programs. This tends, in practice, to be realized by wealth transfer from higher income Groups. Those leaning toward Conservative/Libertarian/GOP beliefs (pls see next chart) view that approach as both ineffective and counter-productive to the OPPORTUNITY that America has offered its Citizens since its founding. Moreover, wealth transfer simply adds growing dependency on government to the recipients of the aid. That doesn’t mean that the center-right does not believe in helping the truly needy. But it reflects studies and analysis that our National “safety net” has become, for many, a too-comfortable “hammock”. The issue erupts in the debate over excessive government deficits, which have become prevalent for 2 - 3 decades with a steeply accelerating trend since 2009. Economists indicate 3 primary methods to address the Debt issue: (1) Increase revenues into the gov’t (taxes); (2) Reduce money outflow from the gov’t (cut spending); (3) Grow the economy and reap additional taxes at current rates plus set aside funds to pay down the Debt. Most Citizens can probably agree with the intent of solution (3) - - but the question is: does option (1) OR option (2) facilitate that best? Some analysis and data are provided in this set of charts. The charts draw freely, and acknowledgement happily given, to the half dozen very fine and quantitative references cited. It is my intent to circulate these thoughts to various colleagues and social network friends. Hope you find it useful. Mark Sussman, 425-643-8961

AN ANALYSIS OF AMERICA’S DEBT - - WHY SPENDING MUST BE SLOWED

Since about 1975, the Nation’s Spending has been exceeding the Revenues it takes in. But since about 2009, the gap has enlarged significantly. Moreover, authoritative projections of future gap growth show this to be an unsustainable situation. Analyses show that it is the spending side of the ledger that is mostly at fault.

SPENDING vs REVENUES - - WHERE THE PROBLEM IS

Ref. 2

Spending

Revenues

AN ANALYSIS OF AMERICA’S DEBT - - WHY SPENDING MUST BE SLOWED

America’s year after year of unbalanced Deficits are accumulating and the rate of accumulation is generally on the increase (chart). This accumulation is an albatross of Debt upon the Nation and an obligation owed to others that if uncorrected will be a legacy that we bequeath to our children. Totally irresponsible on our part ! AND DANGEROUS !

Accumulated Debt across our economy has skyrocketed in the past

30 years.

Ref. 2.

Debt

AN ANALYSIS OF AMERICA’S DEBT - - WHY SPENDING MUST BE SLOWED

The Debt is increasing at a faster rate than our total economy as measured by our Gross National product (chart). Moreover, except for a period tied to World War II, our Debt Level as a per cent of our National economy , has been entering uncharted waters. Why is this particularly alarming? See next chart.

DEBT, NORMALIZED TO ECONOMIC STRENGTH, STILL GROWS

See Ref . 1.

Debt / GDP

AN ANALYSIS OF AMERICA’S DEBT - - WHY SPENDING MUST BE SLOWED

Respected Economists Rogoff and Reinhart have published multiple papers (the latest, Ref 3) warning of the results of Nations treading into waters of Debt levels approaching 90% of GDP. As this chart notes, the Economists see “bad things” such as: inflation, bank instability, joblessness, and destruction of personal wealth from multiple National historical examples.

Is this the future into which our gov’t is haplessly taking us?

IRRESPONSIBLE !

DEBT IS NOT A GOOD ALLY

Ref 3.

AN ANALYSIS OF AMERICA’S DEBT - - WHY SPENDING MUST BE SLOWED

This is another view

of similar data,

whereby the

Nation’s TOTAL

Debt ( including

Household Debt,

Corporate Debt and

Government Debt

at both State/Local

and Federal Levels)

is shown.

Household and

Government Debt

are of similar

amounts with

Federal Debt about

4 times that of

State/Local Debt.

Corporate Debt is

about 2/3 of the

others. But all

spread the same

disease.

60 YEAR HISTORY: TOTAL DEBT AND NATIONAL GDP

Ref. 2.

Debt

GDP

AN ANALYSIS OF AMERICA’S DEBT - - WHY SPENDING MUST BE SLOWED

So what’s the solution ? Studies show that most of the solution must be found on the Spending side, as that is the part that has been growing well beyond historical norms. This data shows where money has been and is currently being Spent. Human Resources (including Social Security, Medicare, Medicaid, and other monies to Citizens is the largest and fastest growing component. Defense spending, often a target of some, has been systematically reduced for decades. Other components have been steady and are at small levels. So a true policy must address the Human resources element.

Relative Change in Expenditures by Government Function. Note the most obvious growth offender.

Ref . 1.

AN ANALYSIS OF AMERICA’S DEBT - - WHY SPENDING MUST BE SLOWED

In concluding this section, this chart repeats the years up till 2012, which we’ve seen before. But now is added the important projection for the future 3 decades. This projection is based on the Federal government’s own data from OMB and GAO Sources, as annotated in the chart. Clearly, the Nation must not let this disasterous annual growth occur.

Ref. 4.

AN ANALYSIS OF AMERICA’S DEBT - - WHY SPENDING MUST BE SLOWED

“EUROPE HAS APPLIED AUSTERITY WITH POOR SUCCESS”

“Austerity is destroying Europe”,

we are told. In fact, this “anti-

austerity” slogan was a big reason

for the victory of newly elected

socialist François Hollande to the

Presidency of France.

BUT …look at the data:

• These countries still spend more

than pre-recession levels .

• France and the U.K. did not cut

spending.

• In Greece, and Spain, when

spending was actually reduced —

between 2009–2011 — the cuts

have been relatively small

compared to what is needed.

• Italy reduced spending between

2009 and 2010 but the data shows

an uptick in 2011. The increase in

spending represents more than the

previous reduction.

DOESN’T SEEM LIKE A LOT OF

DOESN’T LOOK LIKE A LOT OF

AUSTERITY (ie “SPENDING RESTRAINT” HERE !

So … challenge those who say “reducing

spending doesn’t work”.

Source: “Show Me the ‘Savage’ Spending Cuts in Europe, Please”, Veronique de Rugy, May 7, 2012 NATIONAL REVIEW ONLINE / THE CORNER.

FAITH THAT GOV’T WILL SOLVE THE PROBLEM IS

USUALLY NOT BORNE OUT IN PRACTICE

THE ANTS

PUTTING THE GOV’T IN

CHARGE OF VERY COMPLEX

ISSUES, IS SOMEWHAT AKIN

TO ASSIGNING ,TO A COLONY

OF ANTS , THE TASK OF

BUILDING A MODERN CITY.

BUSY-NESS, COMMUNICATING

WITH ARCANE PHEROMONES

AND RUNNING AROUND IN

MULTIPLE DIRECTIONS IS NOT

THE RECIPE.

IT TAKES MORE BRAINPOWER

THAN CAN BE ASSEMBLED

EVEN IN THE VAST OFFICE

CORRIDORS OF WASH DC. IT

TAKES MORE DECENTRALIZED

RESPONSIBILITY

STILL THINK BIG GOVERNMENT KNOWS BEST? CHECK THIS:

CUTTING SPENDING VS REVENUE GROWTH - - THE WAR OF WORDS

Policymakers are divided as to whether government expansion helps or hurts economic growth. Advocates of bigger government argue that government programs provide valuable "public goods" such as education and infrastructure. They also claim that increased gov’t. spending bolsters economic growth by putting money into people's pockets.

Small-government proponents explain that higher spending undermines economic growth by transferring additional resources from the productive (i.e. private) sector of the economy to government, which uses them less efficiently. They also warn that an expanding public sector stymies pro-growth policies - - such as fundamental tax reform and personal retirement accounts - - because critics then use the existence of budget deficits as a reason to oppose policies of their opponents.

Source: Daniel Mitchell

DATA from 2003-04 COMPARING

BIG-SPENDING EUROPE vs THEN SMALLER-SPENDING U.S.A.

Per capita economic output in the U.S.

in 2003 was $37,600 - -more than 40

percent higher than the $26,600

average for EU - 15 nations.[3]

Real economic growth in the U.S. over

the prior 10 years (3.2 % average

annual growth) has been more than 50

percent faster than EU-15 growth for

the same period (2.1 %).[4]

The U.S. unemployment rate is

significantly lower than for the EU-15,

and there is a large gap in the % of

unemployed who have been without a

job for more than 12 months - - 11.8%

U.S., vs 41.9 % EU-15. [5] Living

standards in the EU were about

equivalent to living standards in the

poorest American states-roughly equal

to Arkansas and Montana and only

slightly ahead of West Virginia and

Mississippi, the two poorest states.[6]

TODAY, 2012-13, SOME EUROPEAN NATIONS ARE STEPPING BACK FROM THEIR PRIOR HIGH RATES OF GOV’T SPENDING AND DEBT. UNFORTUNATELY, AMERICA IS REGRESSING TO THE ECONOMICALLY-RETARDED WAYS OF THE 2003-04 EUROPEAN STATES

SOME NUMBERS TO THINK ABOUT

SOME NUMBERS TO THINK ABOUT

RATIONALE SUPPORTING SPENDING AS THE PROBLEM

EXTRACTION COST. The federal

government cannot spend money

without first taking that money from

someone. All of the “taking options”

used to finance gov’t spending have

adverse consequences:

TAXES discourage productive behavior,

particularly in the current U.S. tax

system, which imposes high tax rates

on

BORROWING

and,

in extreme cases, may lead to higher

interest rates.

INFLATION debases a nation's

currency,

Source: Daniel Mitchell & Manhatan Inst.

A TAX LESSON (NOT !)

FROM CALIFORNIA

RATIONALE SUPPORTING SPENDING AS THE PROBLEM

DISPLACEMENT COST. Gov’t spending displaces private-sector activity. Every dollar spent by gov’t necessarily means one less dollar in the productive sector of the economy.

Some government spending, such as maintaining a well-functioning legal system, can have a high "rate-of-return." In general, however, governments do not use resources efficiently, resulting in less economic output.

BEHAVIORAL SUBSIDY COST. Many gov’t.

programs subsidize economically undesirable Citizen

or Business actions.

These

are all examples of reducing economic growth and

diminishing national output because they promote ineffective utilization of resources.

RATIONALE SUPPORTING SPENDING AS THE PROBLEM

INEFFICIENCY COST. Government

directly provides many services such as

education, airports, and postal operations.

But often the private sector could provide

these services at a higher quality and lower

cost.

STAGNATION COST. Government

spending inhibits innovation.

Economic growth is greatly

enhanced by this discovery process.

This analysis, drawn from multiple references, assesses the more foundational political issue underneath the near-term “Fiscal Cliff” aspect. From the more fundamental view, the issue is about the financial responsibility of our Nation, which has amassed a significant debt relative to our Productivity. It is currently at a proportion where respected economic studies say mutliple bad things will go awry in our economy unless we reverse our course. Moreover, future projections, based on expenditures which some regard as iron-clad promises (ie, Entitlements) to the needier segments of our population, show growth to a much worse condition.

The debt growth must likely be solved by increasing gov’t intake (Taxes) or decreasing Gov’t outflow ( Spending). And opponents are lined up strongly on each side … to the extent of near gridlock. Arguments were presented here that the most effective course is to reduce Gov’t outflow of monies. This was shown by a catalog of why gov’t spending hurts our private sector economy in multiple ways:

Additionally, data were presented from our own economy and other Nations that show empirically , from various practices, that excessive spending is a poor choice. The same conclusion is arrived at by various academic studies, also drawn from National and international experience. If you agree, it is important to let our elected representatives know that many if not, most Americans stand by our Heritage and support limited gov’t, individual merit , equal opportunity and private enterprise. That doesn’t mean there is zero role for government. But it does mean that too much gov’t is both ineffective and harmful to our Rights as Citizens. I hope you’ll take a look here and then agree that Citizens must be assertive to their elected Leaders in behalf of America. Some simple techniques for accomplishing this are given below:

SIGN THE “CAUSES” PETITION; I WILL FAX IT TO THE KEY HOUSE & SENATE COMMITTEE

CHAIRMEN WHO DEAL WITH BUDGETARY MATTERS

o GO HERE: www.causes.com/causes/797505-re-establish-federal-state-constitutions-as-

the-basis-of-all-governance?ctm=home

o SIGN IN AND SIGN PETITION

ALTERNATIVELY, SEND FAX OR EMAIL TO YOUR OWN LEGISLATOR (USUALLY VIA A “CONTACT”

FORM) THAT IS AT YOUR REPRSENTATIVE’S WEBSITE

o AN EASY WAY TO DO THIS: useTHIS SITE: www.congressmerge.com

o YOU CAN THEN INPUT YOUR OWN STATE AND YOUR ZIP CODE AND IT WILL GIVE YOU

CONTACT INFO FOR YOUR SENATORS AND REPRESENTATIVE

o Then call/fax or send message via Congressional website

IF YOU’D LIKE TO STAY ABREAST OF A NEW FB SITE FOR THIS GROUP, PLEASE GO TO

https://www.facebook.com/WethepeopleofWA

THEN CLICK ON THE “LIKE” ICON - - THAT WILL ENABLE EASY FUTURE 2-way CONTACT WITH ME

FOR FUTURE ACTIONS SUCH AS THIS PRESENT PETITION.

FINALLY, FROM THE MOUTHS OF BABES:

REF #

REFERENCES / BIBLIOGRAPHY

1 “Deep Dive Into The Federal Government's Budget And The History

Of US National Debt”, Jim Boswell of Quanta Analytics , Business Insider, Jan. 11, 2011,

7:30 PM

2 “Okay, Folks, Let's Put Aside Politics And Look At The Facts...”, Henry Blodget, Business

Insider, Jun. 21, 2012, 12:29 PM

3 “Public Debt Overhangs: Advanced-Economy Episodes Since 1800” , Carmen M.

Reinhart; Kenneth S. Rogoff is Professor of Economics and Thomas D. Cabot Professor

of Economics, Harvard University, Cambridge, Massachusetts, Journal of Economic

Perspectives—Volume 26, Number 3—Summer 2012

4 “The State of the Union’s Finances”, Peter G. Peterson & David M. Walker, Peter G.

Peterson Foundation, March 2009

5 “The Impact of Government Spending on Economic Growth”, Daniel J. Mitchell, March

15, 2005, Heritage Foundation

6 “Show Me the ‘Savage’ Spending Cuts in Europe, Please”, Veronique de Rugy, May 7,

2012, NATIONAL REVIEW ONLINE / THE CORNER

7 “10 Facts on the Fiscal Cliff, Debt, and Spending”, Romina Boccia, December 27, 2012 ,

HERITAGE FOUNDATION/MORNING BELL

THE END - - THANKS FOR YOUR INTEREST

AN ANALYSIS OF AMERICA’S DEBT - - WHY SPENDING MUST BE SLOWED