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News

Obama’s spending freeze saves 250 billion out of 43 trillion in spending over 10 years

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Article from Investors Business Daily.

Excerpt:

The latest idea for reining in the federal government’s runaway spending is to “freeze” nondefense discretionary outlays for three years. That may sound good, but it’s just another gimmick.

We try not to be too cynical about politics, but the White House’s proposed freeze will do nothing to address America’s budget problems.

Last year alone, the U.S. deficit hit $1.4 trillion on record spending of $3.7 trillion. The freeze will apply only to $447 billion in spending — just 12% of the total. Next year, if the freeze goes into effect, it will save just $15 billion — and $250 billion over 10 years.

Compared with the $9 trillion in new debt and $43 trillion in spending expected over the next decade, it’s a pittance — not even a down payment on our gaping shortfalls.

[…]According to the CBO, the $250 billion in savings amounts to a negligible 0.5% of the $43 trillion in spending over the next decade. But it will no doubt be put to good political use, as congressional Democrats suddenly style themselves as fiscal conservatives during the 2010 campaign for passing a meaningless freeze.

Let me be clear. Obama never has been a fiscal conservative, and he isn’t going to start to be one now. It’s just words on a teleprompter that he reads so that you stop calling your representatives.

Commentary

Keith Hennessey explains the looming crisis of entitlement spending

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This is the best post I have ever seen on the problem of demographics and entitlement spending, which is due to explode in about a few years. I’ll summarize so that you will click through and read this post for yourself. There is almost no text in the post, it is all graphs, and they are self explanatory. It will take your about 5 minutes to scare yourself into a coma.

Summary of the post:

  • There are 3 entitlement programs: social security, medicare and medicaid
  • These programs are funded by taxes on young people who are still working
  • These 3 programs currently cost 9% of GDP.
  • By 2050, the costs will have doubled to 18% GDP.
  • Some of this increase will be due to excess growth in health costs
  • And some of this increase will be due to demographics

Let me talk more about the demographics problem:

  • More people are living longer
  • That means that benefits are being paid out over more years, per person
  • A huge group of babies from the Baby Boom started retiring in 2008
  • But the number of younger workers who pay their benefits is not growing fast enough
  • The number of workers needed to pay each retiree’s benefits is shrinking
  • Taxes will have to increase, or benefits will have to decrease

Please read the article. It will help you to put Obama’s massive spending and tax hikes in perspective. By the way, this is a great post to forward to your friends and neighbor’s who voted for Obama who do not like to read about economics and finance.