Post-War Doubling Times For Federal Spending: Every 9 Years at 8 Percent per Year

US government spending on World War Two reached a crescendo in 1945 at $107 billion, after which spending reset to a post-war low of $36 billion in 1948.

Within 4 years, spending had doubled to $72 billion, in 1952.

It took more than 14 years for federal spending to double again, sometime between 1966 and 1967, when spending shot up on the Vietnam War and the Great Society programs under President Johnson. Spending in 1966 was $135 billion.

By 1974, just 8 years later, spending had nearly doubled again to $269 billion.

Under Jimmy Carter it took just over 5 years for spending to double again, sometime between 1979 and 1980. Federal spending reached $504 billion in 1979.

By 1987, 8 years later, federal spending had doubled again to $1 trillion under Ronald Reagan.

Federal spending did not double again until sometime between 2001 and 2002. It took more than 14 years to do so going through the Bush 41 and Bill Clinton presidencies to the presidency of Bush 43. Federal outlays reached $1.9 trillion in 2001.

Which brings us down the pike to today, when spending is projected to finish the fiscal year at $3.8 trillion, doubling in the 10 years since 2001.

That's 7 doublings in 63 years, or a doubling of US government spending every 9 years since World War Two.

According to the Rule of 72, a doubling every 9 years implies an interest rate of 8 percent per year.

In other words, federal spending has an effective rate of built-in spending increases at 8 percent per year every year since 1948.

When you consider that real GDP growth from 1930-2000 has been 3.5 percent and only slightly better than half that in the decade just past, our spending is completely out of step with reality.

(data from usgovernmentspending.com)

Jonah Goldberg Tells 'Them' Where To Go

"And yet you know the next time there’s the slightest, remotely exploitable tragedy or hint of violence, the same reporters, editors, producers, and politicians are going to insist that blood was spilled because of the right wing’s rhetoric.

Well, go to Hell. All of you."

Here.

Standards are Inimical to the Left, That's Why Ratings Agencies are the Enemy

As here at Slate.com:

"If everyone hates the credit rating agencies, why won't anyone enforce the Dodd-Frank provision to dethrone them?"

Even Ken Rogoff Knows It's A Depression But Can't Bring Himself To Say So

We're still co-dependents in the disaster when even our truth-tellers continue to insist on the euphemism which is its rhetorical basis.

Ideas have consequences, and ideas require words.

Story here.

On the knees of the gods our fates are spun.

What Baseline Budgeting Does to Spending in Ten Years

If you listen to Larry Kudlow, you know that he believes that baseline budgeting contributes only as much as 4 percent to the annual increase in spending built-in to the process.

Many others assert the number is more like 7 percent.

Let's see what 7 percent does to a budget over ten years.

Obama submitted a budget for fiscal year 2012, which was defeated in the Democrat-controlled Senate 97-0 in the spring. It called for $3.729 trillion in spending for the fiscal year 2012, set to begin in October 2011.

Let's assume his spending proposal had passed both houses of Congress without objection, and then add 7 percent to the total spending to get the next year's budget, also passed without objection, and so on for ten years.

Here are the ten annual increases, in billions of dollars: 261, 279, 299, 320, 342, 366, 392, 419, 448, and 480. The built-in new spending after ten years totals $3.606 trillion. (Coincidentally, to keep the AAA bond rating from Standard and Poor's, its Sovereign Ratings Committee was looking for $4 trillion in spending cuts today as a first step. It didn't get them.)

That gives you a total budget in 2022, ten years later, of $7.335 trillion, just $123 billion shy of a doubled budget in 10 years, and just what you should expect under the rule of 72.

This kind of doubling is fairly typical for actual spending for any ten year period you pick in the last forty or fifty years, and explains how we got into the pickle in which we presently find ourselves.

So spending increases are built-in at about 7 percent, and Kudlow is underestimating.

Growth to pay for these increases, however, is not built-in, and can never be. It's highly unpredictable and for that reason alone baseline budgeting should be abandoned.

But there's another reason. There hasn't been a single decade since the 1930s where average real growth has come even close to 7 percent, as Louis Woodhill has shown here. Our best decade was way back in the 1940s, when real growth measured 5.57 percent. We haven't done as well since.

There's only one word for what passes for America's spending policy: insanity.

We haven't ever been able to afford what we've been doing.

Radiation of 10 Sieverts Per Hour Detected Between Reactors 1 and 2 at Fukushima

The measurements were made yesterday and reported here and here.

Just 2 sieverts in an hour can be fatal.

Republicans Should Have Demanded Far More Than Reid's Cuts Because They're the Last

(Have you noticed that just like with ObamaCare, it's the Senate calling the shots on everything?)

Senator Reid's cuts are the last spending cuts anyone's going to be seeing for the foreseeable future.

From TheHill.com here:

“The numbers relative to the problem are minimal, but the directional change is huge,” said Rep. Jeb Hensarling (Texas), the chairman of the House Republican Conference.

Yeah, right.

The opposite is more like it. The next fight will be over the 2012 fiscal year budget, and Republicans will die on that hill, after which it's a long way to the election.

Democrats will dig in, having compromised on the Bush tax rates extension, new revenues in the debt ceiling debate, and spending cuts. Their attitude will be that it's time for Republicans to give in on something.

More spending cuts before the election aren't going to happen.

Let's Index the Federal Budget to Existing Housing Prices

Existing housing prices are down roughly 32 percent from the highs (see here). Many are underwater on their mortgages, but people are making do, muddling through, because they have no other choice.

Why can't government do the same?

A 32 percent cut to federal spending currently at $3.819 trillion dollars would be $1.22 trillion. That would reset the budget to $2.6 trillion.

Freeze the federal budget there and index it to the Case-Shiller housing price index. When housing recovers in value, the feds can have a similar raise. If housing values continue to decline, the feds get a similar cut.

Linking the federal budget to the health of the American dream?

Sounds fair to me.

Maybe those SOBs might do their jobs for a change.

Stabilizing Debt to GDP Ratio Requires $1 Trillion in Cuts Per Year, Not $400 Billion

So says John Chambers of Standard and Poor's Sovereign Ratings Committee here. The ratio stabilized at the current level of 75 percent would remain consistent with a AAA debt rating going forward.

The $1 trillion per year represents about 7.5 percent of GDP. With the latest report of current dollar GDP running at $15 trillion, 7.5 percent is $1.13 trillion.

Viewed another way, if we simply threw out baseline budgeting, which builds in increases to the budget each year at a rate near 7 percent, we'd be nearly home free without having to do anything.

And another way to put that is, just freeze the damn budget at current levels for a decade.

Sort of like what the average working Joe has experienced since 2000: no real wage progress. If he can do it, government certainly should.

Obama Caused the Panic, Not the Media

So says Jim Cramer. And he voted for the guy.

Video here:

"He came out and panicked the heck out of us.

"He talked about the higher interest rates for mortgages, he talked to spiking credit cards, he talked about how hard it's going to be to get a student loan. It took us all aback because we felt that he'd be a compromise leader.

"Instead, he created tremendous fear. Tremendous fear means uncertainty. Uncertainty means no spending. Uncertainty means no spending by businesses. It means no hiring. It was a setback.

"He caused the panic, not the media."


Obama went outside the experience of his enemy, Jim Cramer.

George Will Defends the Font of Serial Marriage and Other Destructive Behaviors

Here:

[T]he libertarians' argument. ... The essence of which is the commonsensical principle that before government interferes with the freedom of the individual, and of individuals making consensual transactions in markets, it ought to have a defensible reason for doing so. It usually does not.

Obama Plays 'You Choose' at The Washington Post: How Obama Can Default on Treasuries to Hurt His Enemies and Help His Friends, and Get Re-elected

I'm drinking gin on a hot Saturday afternoon, putting on my 'Evil Obama' hat and playing 'You Choose' here at The Washington Post.

Imagine you are Obama.

You want to transform America into a European socialist welfare state. The Republicans are standing in your way. They want to freeze the debt ceiling where it is to deprive you of the opportunity to follow through with your dramatic spending increases, which have tripled the annual budget deficits.

The monthly revenue stream will leave you short by something around $125 billion on average without the freedom to sell new debt.

The people who will vote for you need to get their money in a government shutdown.

The people who will not vote for you anyway must not get theirs.

You'll make your choices, and when your enemies complain they're not getting their dough, you can plausibly blame the Republicans for tying your hands.

In the process you can destroy the full faith and credit of the United States and cut her down to size, and finish the (crony) capitalists once and for all.

You can end the wars and bring home the troops (saving tons of money and improving your popularity at the same time).

You can tank the economy and get sweeping powers to spend the trillions of dollars Paul Krugman wanted you to spend in the first place (on people who will vote for you).

Does he have the guts? Or does he just want to play golf for the rest of his life?

The Tea Party Has Already Made The Democrats Blink on Tax Increases

"They’ve moved in other words, the Senate Majority Leader, far in their direction."

-- George Will, here

An excellent point, the premise of which is that politics is the art of the possible.

In point of fact not just once, either. The extension of the Bush tax rates from this crowd of left wing fanatics was no mean achievement.

The Tea Party speaks for many in wanting the deficit spending to stop. In view of the fact that deficit spending and enthusiasm for taxation are the cornerstones of the opposition, getting Democrats to relent on taxes late last year and again now is pretty good for just 20 or 30 fiscal extremists in the US House.

It should remind us all that imagination is important to political success. Michael Steele didn't have any in early 2010 when he opined that Republicans probably couldn't take back the House. Boy was he mistaken.

It would be a mistake to stop imagining that we can reduce spending. The only caveat is whether Obama  possesses enough character to refrain from defaulting on the debt. If he doesn't and does default, it could be blamed on overreaching by the Tea Party.

At a minimum, Obama's persistent extreme rhetoric threatening such a default should trouble more people. Even left of center types here and there are upset by his behavior, which is a good sign. It is nothing short of disgraceful that a president should talk this way, and it gives everyone over the age of forty pause.

I say that's a tactic, not a promise. Obama is going outside the experience of the enemy, one of Alinsky's rules.

The Tea Party should keep pressing the issue. And Republicans need to buck up and go on the rhetorical offensive. The farthest they should go is a clean debt ceiling increase of $1 trillion, which buys more time but doesn't give the president the space he wants, and needs.

The next crisis date is October 1, by which time we must have a budget agreed to by the Democrats to fund the next fiscal year. 

GDP Revisions Beg The Question: Did Obama Really Avert a Depression?

I don't see how anyone can believe that nonsense.

GDP 2008: - 0.3 percent

GDP 2009: - 3.5 percent

GDP 2010: +3.0 percent

There's a nice summary here.

Despite the unprecedented way in which George Bush and then Barack Obama jettisoned capitalism, unleashing torrents of bailouts, credit and federal manipulation during the market meltdown in 2008 and 2009, GDP ended up posting back to back years of negative growth anyway.

When you have back to back quarters of negative growth, they call it a recession.

When you have back to back years of negative growth, they call it a depression.

We had a depression.

One can plausibly argue that 2010's + 3.0 percent GDP imprint is evidence that the federal deluge got us out of the depression, but it didn't avert it. We had a depression. We spent gobs to get out of it. And now for the first half of 2011 GDP is stalled at 0.4 and now 1.3, jobs aren't coming back, housing continues to sink, prices of essentials are rising, kai ta loipa.

Krugman and company thought we didn't spend anywhere near enough to get out. Well, we did, just not enough to get Obama out to 2012, that's all!

A quick, dirty depression arguably would have been better. Instead, we've got this, including a nasty argument about paying for all the borrowing to finance it.

'Things Always Look Darkest Before They Go Completely Black'

Yves Smith at Naked Capitalism here has a fairly low opinion of the regime's default scare tactics:

[U]tter failure of the Treasury or Fed to make any reassuring noises or discuss contingency plans is making rattled nerves much worse than they need to be.

Come Over to the Debt Side

Q2 2011 GDP at 1.3 Percent, Q1 Revised Down Into the Tank to 0.4 Percent

Just how does Q1 go from 1.8, to 1.9, to 0.4? That's an error of only 79 percent.

Q4 2010 also was revised down, to 2.3 percent from 3.1 percent. That's an error of 26 percent.

And revisions going back to 2007 when the Dems took over the Congress under George Bush are even worse, saved for the end of July while everyone's on vacation and not paying attention. And of course it's Friday.

Which reminds me. I neglected to do Bank Failure Friday last week. There were some, but sometimes reporting on it feels like writing an obituary, and last Friday was filled with too much death already.

The GDP story is here.

Obama Regime's Default Alarmism is Straight out of Saul Alinsky

Caroline Baum notices that the Obama regime is acting strangely:

Instead of dangling the default threat every chance they get, Obama and Geithner should be telling the world that the U.S. has every intention, and the resources, to meet its debt obligations. They should shout it from the rooftops, put a banner on the Treasury Direct website, and use the Sunday talk shows to reassure investors, not frighten them.

Rule 3 for Radicals: Whenever possible, go outside the experience of the enemy.

And make no mistake about it, you are the enemy.

Another Voice Wrongly Claiming 'The Money is in the Middle'

Brian Wesbury at The DC, here:

What most people don’t realize is that the U.S. has gorged so much (boosting spending from roughly 18% of GDP in 2000 to 24% of GDP today), that the only way to pay for it is to tax the middle class. ...

The money is in the middle. And the only way our politicians can get it is to follow Europe’s lead and institute a national sales tax or Value-Added Tax (VAT). This is the elephant in the room that is never talked about. Those who are using the debt ceiling in an attempt to cut spending are actually saving the middle class from tax hikes — not the millionaires and billionaires.


It's a frequently repeated claim that the money is in the middle, but it's just not true, no matter how often  it is said.

If all the (reported) income in America were poured into a giant hour glass, you'd have to start it and wait about twenty minutes to begin to visualize how all the money is actually distributed.

A snapshot taken at that moment would show $5.7 trillion in adjusted gross income still in the top, and $2.8 trillion in AGI in the bottom. The kicker is that 35 million tax returns split what's on top, while the remaining 105 million tax returns, 75 percent of the total, divvy up what's on the bottom.

The money's definitely not "in the middle."

It's hard to get agreement on what's middle class in America, especially since it is a conceit of our society that everyone is middle class. The rich aspire down to it to escape notice, the poor up to it to escape the indignities of dependence.

But no matter what smoke anyone tries to blow up your bottom, the biggest single pile of money remains with the top 25 percent:

Top 10 percent = 14 million tax returns (10 percent of the total) = $3.9 trillion in AGI
The next 25-10 percent = 21 million tax returns (15 percent of the total) = $1.8 trillion in AGI

The next 50-25 percent = 35 million tax returns (25 percent of the total) = $1.7 trillion in AGI
The bottom 50 percent = 70 million tax returns (50 percent of the total) = $1.1 trillion in AGI.

It's ridiculous to think that a VAT tax will somehow generate huge piles of new tax revenue on the backs of the middle class.  The VAT will hurt them just like Social Security and Medicare taxes hurt them because it's regressive, not because they have a lot of untapped money they're going to be parting with.

Considering how much tax evasion there already is in America of the unreported income variety, variously estimated (here at $2 trillion, resulting in a tax gap of $500 billion), a VAT will fail simply because it will drive more and more of the economy underground where cash is king and credit cards, checks, invoices and receipts are anathema. Think of it as the inverse of how the rich escape high rates of taxation, for example by shifting to capital gains away from ordinary income. A quicker way to become Greece I cannot think of.

Setting money free to move around openly is the key to an effective tax policy. But bringing it out into the open where it can be captured and taxed depends on perceptions of fairness.

As long as too many people think some people should pay taxes at a higher rate just because they have more, we're not going to get there. 

Gro Harlem Brundtland, Left Wing Anti-Semitic Fanatic, Was Breivik's Target

The following was reported here:

"Anders Behring Breivik had plans to come to Utoeya (island) while Gro Harlem Brundtland was visiting on Friday, but claims under interrogation that he was delayed," Aftenposten reported on Monday, citing unnamed sources.

The newspaper said the 32-year-old right-wing fanatic wanted to "hit Gro".