2008 Balanced Budget 101 ELECTION 2008 – Lipstick on the Pig (Full Text Online for Google Translate)

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Balanced Budget 101

Robert David STEELE VivasChapter in ELECTION 2008: Lipstick on the Pig (Earth Intelligence Network, 2008)

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It’s Not Policy until It’s in the Budget

The USA is INVOLVENT.  This is what the Comptroller General of the United States, David Walker, briefed to Congress after delivering his July 2007 report on 2006 to the Secretary of the Treasury.  Every Member of Congress, and every Senator, including both of the Senators now running for the Presidency, chose to ignore the Comptroller General, who subsequently resigned in the ninth year of his fifteen year tenure, on 12 March 2008.[1]

Nothing the candidates running for President have said is real.  It is not real because neither of the “major” candidates has convened a transitional non-partisan Cabinet, neither has conceived of a strategy for governing, and neither has even attempted to conceptualize what a balanced budget might look like.

After achieving Electoral Reform, the single most important measure citizens can demand to achieve governance reform is to mandate a balanced budget.  Such a budget might or might not reflect a decision to stop taxing individuals and instead tax financial transactions among all organizations, and especially banks, but a balanced budget must address means (revenue) and ways (programs) together.

Citizens should condemn the current foolishness in which the candidates trade barbs about lipstick on the pig, offer a never-ending series of platitudes and promises, none of them real, all of them specious and without substance.

The Republic is in a huge mess.  I have consulted senior officials who served previously in leadership positions in the Office of Management and Budget (OMB, the M has been silent since the 1970’s).  I have also consulted leading authors, such as John Bogle, author of the extraordinary book, The Battle for the Soul of Capitalism: How the Financial System Underminded Social Ideals, Damaged Trust in the Markets, Robbed Investors of Trillions – and What to Do About It.[2]

1.  Foreign countries have investments in the USA that would vanish overnight if we allowed a meltdown.  China, for example, holds $376 billion dollars in Freddie Mac and Fannie Mae.[3]

2.  Pulling out of Iraq would not save significant amounts of money—what would is a decision to not take the option years on virtually all of the high-end weapons and mobility systems that we do not need.

3.  There are numerous options available for both increasing revenue and reducing costs.

We can get back on track if every citizen demands the four reforms described in the first chapter on The Substance of Governance, and we all realize that nothing we do will matter to our grandchildren except our creation of a compelling new model for zero waste, clean energy, universal health, and free wealth-producing education for the five billion poor.[4]

I will begin by pointing any who wish to march into the belly of the beast to the single best book on the subject, Understanding the Budget of the United States Government.[5]  That book is the “graduate” degree in the Federal Budget.  Here, from Wikipedia, and benefiting from the ministrations of a professional risk analyst[6] who in turn drew on the insights of David Walker, former Comptroller General of the United States, is the simplest possible citizen overview.

Please allow me to set the stage:

1.  The fundamentals of the Republic are indeed sound—we’re growing and we are deep tough.

2.  The leadership, both in Washington and on Wall Street, has been both lunatic and criminal.  The over-all cause of this meltdown was Washington being bribed into allowing Wall Street to get into complex derivatives that moved from being founded in real assets, to being totally speculative and just over the line on being fraudulent.  [By the by, Warren Buffet nailed it in 2003.

3.  The Department of Justice has been next to worthless at recovering assets, and shown no common sense at all (e.g. Ken Lay’s widow got to keep his ill-gotten gains because he died before a judge could rule against him).  People are being allowed to walk out with hundreds of millions of dollars in fraudulently acquired personal gains that will cost the taxpayer close to two trillion.

4.  Congressional decisions were bought by corporations, and are a betrayal of the public trust.

5.  Cabinet decisions across both the Clinton and Bush Administrations have been bought by mega-stakeholders, and represent a betrayal of the public trust.

6.   Here is the good news:

  • Deficits were much higher under President Ronald Reagan, as a percent of Gross National Product or Gross Domestic Product
  • Future unfunded obligations for Medicare and Medicaid are over-stated.  We can get the top 75 drugs for 1% (one percent) of the current cost in the US, legally—your government, which is to say, your corrupt Congress and corrupt Cabinet—saw fit to not negotiate with the pharmaceuticals, and to tax fit Americans to pay 99% too much for medications needed by the unfit Americans.
  • We can cut our heavy metal military in half and still have a better military than anyone—the savings will fully fund safe water, safe food, clean air, clean energy, and universal health care.  We can also cut the secret intelligence budget from $60 billion to $10 billion and put the savings into quality education for all, and recapitalization of  infrastructure.
  • We can eliminate individual income taxes below $1 million, and increase revenue by wiping out import-export fraud, insurance fraud, and by taxing financial transfers.
  • We can migrate within ten years to Zero Waste, Biomimicry, Green Chemistry, Sustainable Design, Family-Friendly Communities, Local Agriculture, an end to water-intensive endeavors that we do not need (e.g. growing grain for fuel when we have lots of natural gas to draw on).

Following the Farcaster contribution as posted to Wikipedia, from which I have deleted the graphics, I will provide two additional sections for this chapter:

  1. Tid-bits from CATO Institute and the Peterson Foundation, with short comments.
  1. A powerful graphics on cost of peace versus war, one that calls into question our priorities.

United States federal budget[7][By “Farcaster” at Wikipedia. ]
The Budget of the United States Government is a federal document that the President submits to the U.S. Congress. The President's budget submission outlines funding recommendations for the next fiscal year, which begins on October 1st. Congressional decisions are governed by rules and legislation regarding the federal budget process. House and Senate Budget committees each develop budget resolutions, which provide spending limits for the House and Senate Appropriations Committees' subcommittees, which then approve individual appropriations bills to allocate funding to various federal programs. After Congress approves an appropriations bill, it is sent to the President, who may sign it into law, or may veto it. A vetoed bill is sent back to Congress, which can pass it into law with a two-thirds majority in each chamber. Congress may also combine all or some appropriations bills into an omnibus reconciliation bill. In addition, the President may request and the Congress may pass supplemental appropriations bills or emergency supplemental appropriations bills.

Several government agencies provide budget data and analysis. These include the Government Accountability Office (GAO), Congressional Budget Office, the Office of Management and Budget (OMB) and the U.S. Treasury Department. These agencies have reported that the federal government is facing a series of important long-term financing challenges. Expenditures related to entitlement programs such as Social Security, Medicare and Medicaid are growing considerably faster than the economy overall, as the population matures.

Budget Basics

The U.S. Constitution (Article I, section 9, clause 7) states that “[n]o money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of Receipts and Expenditures of all public Money shall be published from time to time.”

Each year, the President of the United States submits his budget request to Congress for the following fiscal year, as required by the Budget and Accounting Act of 1921. Current law (31 U.S.C. 1105(a)) requires the President to submit a budget no earlier than the first Monday in January, and no later than the first Monday in February. Typically, Presidents submit budgets on the first Monday in February.

The federal budget is calculated largely on a cash basis. That is, revenues and outlays are recognized when transactions are made. Therefore, the full long-term costs of entitlement programs such as Medicare, Social Security, and the federal portion of Medicaid, are not reflected in the federal budget. By contrast, many business and some foreign governments have adopted forms of accrual accounting, which recognizes obligations and revenues when they are incurred. The costs of some federal credit and loan programs, according to provisions of the Federal Credit Reform Act of 1990, are calculated on a net present value basis.

Federal agencies cannot spend money unless funds are authorized and appropriated. Typically, separate Congressional committees have jurisdiction over authorization and appropriations. The House and Senate Appropriations Committees have 12 subcommittees, which are responsible for drafting the 12 regular appropriations bills, which determine amounts of discretionary spending for various federal programs. Appropriations bills must pass Congress and be signed by the President in order to give federal agencies legal authority to spend. In many recent years, regular appropriations bills have been combined into “omnibus” bills.

Congress may also pass “special” or “emergency” appropriations. Spending that is deemed an “emergency” is exempt from certain Congressional budget enforcement rules. Funds for disaster relief have sometimes come from supplemental appropriations, such as after Hurricane Katrina. In other cases, funds included in emergency supplemental appropriations bills support activities not obviously related to actual emergencies, such as parts of the 2000 Census of Population and Housing. Special appropriations have been used to fund most of the costs of war and occupation in Iraq and Afghanistan.

Budget resolutions and appropriations bills, which reflect spending priorities of Congress, will usually differ from funding levels in the President's budget. The President, however, retains substantial influence over the budget process through his veto power and through his congressional allies when his party has a majority in Congress. The Democratic Party, having won a net increase of seats in both the House and Senate in the November 2006 elections, has had control of Congress since January 2007.

Major receipt and expenditure categories

The U.S. Federal Government collected $2,568 billion in FY2007, while spending $2,730 billion, generating a total deficit of $162 billion, which was added to the United States public debt. Since 1970, the U.S. Federal Government has run deficits for all but four years (1998-2001)[1] adding to a total debt of $9.34 trillion as of April 24, 2008. [2]

Individual income taxes (45%) and Social Security/Social Insurance taxes (34%) are the primary receipt categories. Social Security, Defense, and Medicare/Medicaid spending are the main spending categories, at roughly 20% of total expenditures each.

Federal Budget Data

Several government agencies provide budget data. These include the Government Accountability Office (GAO), Congressional Budget Office, the Office of Management and Budget (OMB) and the U.S. Treasury Department. CBO publishes an economic and budget outlook in January, which is typically updated in August. OMB, which is responsible for organizing the President's budget presented in February, typically issues a budget update in July. GAO and Treasury issue Financial Statements of the U.S. Government, usually in the December following the close of the federal fiscal year, which occurs September 30. The Treasury Dept. also produces a Combined Statement of Receipts, Outlays, and Balances each December for the preceding fiscal year, which provides detailed data on federal financial activities.

Federal Budget Projections

CBO calculates 10-year baseline projections, which are used extensively in the budget process. Baseline projections are intended to reflect spending under current law, and are not intended as predictions of the most likely path of the economy. In recent years, OMB has presented 5-year projections. CBO and GAO issue long-term projections from time to time.

Long-term Budget Issues

Mandatory Spending and Entitlements

Social Security and Medicare expenditures are funded by permanent appropriations, and so are considered “mandatory” spending according to the 1997 Budget Enforcement Act. Social Security and Medicare are sometimes called “entitlements,” because people meeting relevant eligibility requirements are legally entitled to benefits. Some programs, such as Food Stamps, are appropriated entitlements. Some mandatory spending, such as Congressional salaries, is not part of any entitlement program. Interest on the national debt is not discretionary. Funds to make federal interest payments have been automatically appropriated since 1847. Mandatory spending accounted for 53% of total federal outlays in FY2007, with net interest payments accounting for an additional 8.6%. Discretionary outlays, which rely on annual appropriations for funding, accounted for 38.2% of total federal outlays in FY2007. Over the past four decades, the proportion of federal outlays spent on mandatory programs has increased on average.

According to CBO projections (The Long-Term Outlook, Alternative Fiscal Scenario), spending on Social Security is projected to reach 6.1% of GDP and Medicare and Medicaid are projected to total 12.5% of GDP in FY2050. By comparison, federal outlays in FY2007 were 20% of GDP and federal revenues were 18.8% of GDP. In other words, spending on those three programs is projected to take up nearly the same proportion of the economy in FY2050 as all federal revenues in FY2007. Unless these long-term fiscal imbalances are addressed by raising taxes or drastic cuts in discretionary programs, the federal government will at some point be unable to pay its obligations.[3]

As discussed further below, the Medicare Part A (Hospital Insurance) program began to run a deficit in FY 2007 and Social Security follows thereafter in 2017. Both programs are funded by dedicated payroll taxes that do not cover payouts and run increasing deficits for the foreseeable future, placing significant pressure on the budget.[4]

Social Security

Main article: Social Security debate (United States)

Social Security spending will increase sharply over the next decades, largely due to the retirement of the baby boom generation. The number of workers paying into the program continues declining relative to those receiving benefits. The number of workers paying into the program was 6.1 per retiree in 1960; this declined to 3.3 in 2007 and is projected to decline to 2.1 by 2040.[5]The Congressional Budget Office (CBO) projects that an increase in payroll taxes equivalent to 1.8% of gross domestic product (GDP) would be necessary to put the Social Security program in fiscal balance for the next 75 years. (CBO, The Long-Term Outlook, Dec. 2007)[6]In other words, raising the payroll tax rate to 14.1% during 2008 (from the current 12.4%) or cutting benefits by 11.4% would address the program's budgetary concerns indefinitely; these amounts increase to around 16% and 22% if no changes are made until 2041. Projections of Social Security's solvency are sensitive to assumptions about rates of economic growth and demographic changes.[7]

Since recommendations of the Greenspan Commission were adopted in the early 1980s, Social Security payroll taxes have exceeded benefit payments. In FY2007, Social Security received $187 billion more in payroll taxes than it paid out in benefits. This annual surplus is credited to Social Security trust funds that hold special non-negotiable Treasury securities, although it is borrowed and spent by the government for other purposes. The total balance of the trust funds is $2.2 trillion in 2007 and is estimated to reach $4.3 trillion by 2017. At that point, payments will exceed payroll tax revenues, resulting in the gradual reduction of the trust funds balance as the securities are redeemed against other types of government revenues. By 2041, the trust funds will be exhausted. Under current law, Social Security payouts would be reduced by 22% at that time, as only payroll taxes are authorized to cover benefits.[8]

The present value of unfunded obligations under Social Security during FY 2007 is approximately $6.8 trillion. In other words, this amount would have to be set aside today such that the principal and interest would cover the shortfall over the next 75 years.[9]

Budgetary Treatment of Social Security

Social Security trust fund amounts have been borrowed and spent and are a component of the national debt. Further, payroll tax receipt surpluses are considered part of the total tax revenue base of the federal government, effectively reducing the reported budget deficit relative to what it would be if social security were accounted for separately. Social Security payroll taxes and benefit payments, along with the net balance of the U.S. Postal Service are considered “off-budget.” Administrative costs of the Social Security Administration (SSA), however, are classified as “on-budget.”

The total federal deficit is the sum of the on-budget deficit (or surplus) and the off-budget deficit (or surplus). Since FY1960, the federal government has run on-budget deficits except for FY1999 and FY2000, and total federal deficits except in FY1969 and FY1998-FY2001.[10]

Using 2007 as an example, the “On-Budget” deficit of $344 billion is reduced by the “Off-budget” surplus of $182 billion to arrive at the “Total” deficit of $162 billion. It is this latter amount that is often reported in the media. The national debt increased approximately $500 billion in 2007, which is the $344 billion on-budget deficit plus an additional $156 billion of supplemental appropriations or otherwise non-budgeted expenditures, primarily the wars in Afghanistan and Iraq and earmarks.[11][12]

Medicare and Medicaid

Main articles: Medicare (United States) and Medicaid

Spending on Medicare and Medicaid is projected to grow dramatically in coming decades. While the same demographic trends that affect Social Security also affect Medicare, rapidly rising medical prices appear a more important cause of projected spending increases.

The CBO has indicated that: “Future growth in spending per beneficiary for Medicare and Medicaid—the federal government’s major health care programs—will be the most important determinant of long-term trends in federal spending. Changing those programs in ways that reduce the growth of costs—which will be difficult, in part because of the complexity of health policy choices—is ultimately the nation’s central long-term challenge in setting federal fiscal policy.” Further, the CBO also projects that “total federal Medicare and Medicaid outlays will rise from 4 percent of GDP in 2007 to 12 percent in 2050 and 19 percent in 2082—which, as a share of the economy, is roughly equivalent to the total amount that the federal government spends today. The bulk of that projected increase in health care spending reflects higher costs per beneficiary rather than an increase in the number of beneficiaries associated with an aging population.”[13]

The present value of unfunded obligations under all parts of Medicare during FY 2007 is approximately $34.0 trillion. In other words, this amount would have to be set aside today such that the principal and interest would cover the shortfall over the next 75 years.[14]

Debt relative to gross domestic product (GDP)

Main article: United States public debt

GDP is a measure of the total size and output of the economy. One measure of the debt burden facing the country is measuring debt relative to GDP. In fiscal year 2007, the public debt was approximately $5.0 trillion (36.8 percent of GDP) and the total debt was $9.0 trillion (65.5 percent of GDP.)[15] The public debt represents money owed to those holding government securities such as treasury bills and bonds. The total debt includes intra-governmental debt, which includes amounts owed to the Social Security Trust Funds (about $2.2 trillion in FY 2007)[16] and Civil Service Retirement Funds. By August 2008, the total debt was $9.6 trillion.[17]

Historical analysis of government spending or debt relative to GDP can potentially be misleading, according to the GAO, CBO, and U.S. Treasury Department. This is because the rate of increase in entitlement spending is now significantly higher than the growth in GDP and expected tax revenues. If significant reforms are not undertaken, benefits under entitlement programs will exceed government income by over $40 trillion over the next 75 years.[18]According to the GAO, this will cause debt ratios relative to GDP to double by 2040 and double again by 2060, reaching 600 percent by 2080.[19]These non-partisan organizations have used words such as “unsustainable” and “train wreck” to describe the budget situation 20-40 years hence if substantive reforms are not made.[20]

Current Budget Issues

Deficit Spending and Increases in the Debt

Due to the variety of special appropriations spending that is excluded from the budget deficit calculations, it can be difficult to determine how much the government actually spends relative to revenues. The increase in the national debt during a given year is a helpful measure to determine this amount. Since FY 2003, the national debt has increased approximately $550 billion per year on average.[21]


GAO defines “earmarking” as “designating any portion of a lump-sum amount for particular purposes by means of legislative language.” Earmarking can also mean “dedicating collections by law for a specific purpose.” [22] In some cases, legislative language may direct federal agencies to spend funds for specific projects. In other cases, earmarks refer to directions in appropriation committee reports, which are not law. Various organizations have estimated the total number and amount of earmarks. An estimated 16,000 earmarks containing nearly $48 billion in spending were inserted into larger, often unrelated bills during 2005.[23] While the number of earmarks has grown in the past decade, the total amount of earmarked funds is approximately 1-2 percent of federal spending.[24]

Responses to the 2008 Economic Slowdown

The Economic Stimulus Act of 2008 provided an estimated $170 billion in tax rebates to stimulate the economy. The Congressional Budget Office (CBO) estimated that the Act “would increase budget deficits (or reduce future surpluses) by $152 billion in 2008 and by a net amount of $124 billion over the 2008-2018 period.”[25]

Budgetary Implications of the 2001 and 2003 Tax Cuts

A variety of tax cuts were enacted under President Bush between 2001-2003, through the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). Most of these tax cuts are scheduled to expire December 31, 2010. Since CBO projections are based on current law, the projections discussed above assume these tax cuts will expire, which may prove politically challenging. CBO has estimated that extending these cuts would cost the U.S. Treasury nearly $1.8 trillion in the following decade, dramatically increasing federal deficits and exacerbating the entitlement-related risks described above.[26] Senator John McCain has proposed extending the 2001 and 2003 tax cuts for all income levels, while Senator Barack Obama has proposed extending them for low- and middle-income taxpayers.[27]

Dynamic Scoring, Supply Side Economics and Taxes

The appropriate level and distribution of federal taxes has long been a controversial topic. Since the 1970s, some “supply side” economists have contended that lowering taxes could stimulate economic growth to such a degree that tax revenues could rise, other factors being held constant. However, economic models and econometric analysis have found scant support for the “supply side” theory.

Some economists have called for using “dynamic scoring models,” which incorporate feedback effects of tax cuts. CBO has concluded, however, that standard scoring methods incorporate the most important and immediate feedback effects and that attempting to include other feedback effects would lead to speculative results. CBO[28], and Gregory Mankiw, a Harvard macroeconomist and former head of the Council of Economic Advisors in the George W. Bush administration, have concluded that cuts in federal taxes could stimulate new economic activity that would generate revenues that offset nearly half the cost of the tax cut, if reduced revenues were matched by spending cuts. Offsets when lost revenues were not matched by spending cuts were much lower.[29] In 2007, the U.S. Treasury issued an analysis of dynamic scoring models that implied that only 7% of lost revenues would be offset by revenue feedback effects. These studies suggest that federal tax cuts would dramatically increase deficits. [30][31]

While total U.S. tax receipts grew from 2004 to 2007 by an average of $189.4 billion per year in current dollars[32], the studies cited above would conclude that such tax receipts would have been significantly higher had the 2001 and 2003 tax cuts not been made. Income tax revenues in dollar terms did not regain their FY 2000 peak until 2006. Total federal tax revenues relative to GDP have yet to regain their 2000 peak.[33]

Can the U.S. Outgrow the Problem?

Some politicians and economists have argued that the U.S. can “grow its way” out of these fiscal challenges. Their argument is that economic growth (driven by tax cuts, productivity improvements, and borrowing) will generate sufficient tax revenue to offset growing entitlement spending.[34] However, the GAO has estimated that double-digit GDP growth would be required for the next 75 years to do so; GDP growth averaged 3.2% during the 1990's. Because mandatory spending growth rates will far exceed any reasonable growth rate in GDP and the tax base, the GAO concluded that the U.S. cannot grow its way out of the problem.[35]

War Funding and the Budget

Much of the costs for the wars in Iraq and Afghanistan have not been funded through regular appropriations bills, but through emergency supplemental appropriations bills. Some budget experts argue that emergency supplemental appropriations bills do not receive the same level of legislative care as regular appropriations bills. In addition, emergency supplemental appropriations are not subject to the same budget enforcement mechanisms imposed on regular appropriations. Funding for the first stages of the Viet Nam War was provided by supplemental appropriations, although President Johnson eventually acceded to Congressional demands to fund that war through the regular appropriations process.

The Congressional Budget Office (CBO) estimates that the President's FY2009 budget proposals would provide $188 billion in budget authority for FY2008. [36] CBO estimates that appropriations for operations in Afghanistan and Iraq since 2001 through February 2008 total $752 billion.[37] That would be approximately 4% of federal spending over the period.

Budget authority is legal authority to obligate the federal government. For many war-related activities there may be a long lag between the time when budget authority is granted and when payments (outlays) are made by the U.S. Treasury. In particular, spending on reconstruction activities in Iraq and Afghanistan has lagged behind available budget authority. In other cases, the military uses contracts that are payable upon completion, which can create long lags between appropriations and outlays.

In principle, the Department of Defense (DoD) separates war funding from base funding. In most cases, however, funds for operations in Iraq and Afghanistan use the same accounts as other DoD accounts. This raises challenges to attempts to achieve a precise separation of expenditures on operations in Iraq and Afghanistan from the base defense operations.

Basic Budget Terms (based on GAO Glossary)

Appropriations “Budget authority to incur obligations and to make payments from the Treasury for specified purposes.”

Budget Authority “Authority provided by federal law to enter into financial obligations that will result in immediate or future outlays involving federal government funds.”

Outlay “The issuance of checks, disbursement of cash, or electronic transfer of funds made to liquidate a federal obligation.” The term “outlays” is usually synonymous with “expenditure” or “spending.”

The amount of budget authority and outlays for a fiscal year usually differ because budget authority from a previous fiscal year in some cases can be used for outlays in the current fiscal year. Some military and some housing programs have multi-year appropriations, in which budget authority is specified for several coming fiscal years.

Total Outlays in Recent Budget Submissions

The President's budget also contains revenue and spending projections for the current fiscal year, the coming fiscal years, as well as several future fiscal years. In recent years, the President's budget contained projections five years into the future. The Congressional Budget Office (CBO) issues a “Budget and Economic Outlook” each January and an analysis of the President's budget each March. CBO also issues an updated budget and economic outlook in August.

Actual budget data for prior years is available from the Congressional Budget Office [38] and from the Office of Management and Budget (OMB) [39].

See also

External links

External links: “Chart Talk” ExamplesOne of the best ways to understand the long-term budget risks is through helpful charts. The following sources contain charts and commentary:


  1. ^ Bittle, Scott & Johnson, Jean. “Where Does the Money Go?” Collins; New York: 2008.
  2. ^ Government – Schedules of Federal Debt – Daily, Unaudited
  3. ^ GAO Citizens Guide
  4. ^ GAO Fiscal Briefing
  5. ^ Concord Slides
  6. ^ http://www.cbo.gov/doc.cfm?index=8877&type=1
  7. ^ Social Security Trustees Report, p. 26
  8. ^ Social Security Trustees Report 2008
  9. ^ 2007 Report of the U.S. Government Page 47
  10. ^ http://www.whitehouse.gov/omb/budget/fy2009/sheets/hist01z1.xls
  11. ^ OMB Budget Page 358 Table 23-1
  12. ^ Treasury Direct Debt Statistics
  13. ^ CBO Testimony
  14. ^ 2007 Report of the U.S. Government Page 47
  15. ^ FY 2009 Budget pp. 127-128
  16. ^ Social Security Trust Fund Report, p. 19
  17. ^ U.S. National Debt Clock
  18. ^ 2007 Report of the U.S. Government Page 47
  19. ^ GAO Citizen's Guide Page 7
  20. ^ The Federal Government's Financial Health
  21. ^ Treasury Direct
  22. ^ http://www.gao.gov/cgi-bin/getrpt?GAO-05-734SP
  23. ^ Hooked on handouts – Opinion – USATODAY.com
  24. ^ Harvard Briefing Paper
  25. ^ CBO Study
  26. ^ CBO Analysis Page 6
  27. ^ Tax Policy Institute Comparison
  28. ^ CBO Study
  29. ^ Mankiw Study
  30. ^ Washington Post 2007
  31. ^ Washington Post 2006
  32. ^ http://www.gpoaccess.gov/usbudget/fy08/sheets/hist01z3.xls
  33. ^ CBO Historical Tables
  34. ^ Washington Post
  35. ^ GAO U.S. Fiscal Briefing 1/08
  36. ^ An Analysis of the President’s Budget for Fiscal Year 2009
  37. ^ CBO Letter to Sen. Conrad, Feb. 11, 2008
  38. ^ Historical budgets – from the Congressional Budget Office
  39. ^ Welcome to OMB

CATO Institute

Economic freedom around the world remains on the rise but it has declined notably in the U.S. since the year 2000, according to the Economic Freedom of the World: 2008 Annual Report, released by the Cato Institute in conjunction with the Fraser Institute of Canada. In 2000 the U.S. was ranked the second-freest economy, but has fallen to 8th place this year. “The rule of law, government spending, and regulation are the areas where the United States saw the most troubling declines in its ratings this decade,” comments Cato scholar Ian Vasquez.[8]

I do not agree with the CATO Institute on “free trade,” but they absolutely have to be at the table and we must attend to their views and concerns with total earnestness.

Peterson Foundation

The first and current CEO of the Peterson Foundation is David Walker, former Comptroller General of the United States.  I admire and recommend the citizen’s guide that he put together.  I do have to say, however, that he integrates into his thinking two flaws that I find are common to all economic analyses whether from the left or the right:

1.  Rapidly rising Medicare and Medicaid costs are taken as a given.  I can cut that to 1% at best, 10% at worst.[9]

2.  The actual cost of the military is vastly higher than either GAO or OMB represent.  Here I do have to resort to a graphic, one that I have shown to the #2 of a Federal Reserve region, who found the graphic credible.[10]

Click on Image to Enlarge

Reasonable people can always find a way to consider alternative sources of information.  What matters to me is that this kind of information is not being presented to the public or to their elected officials in a manner that compels respect.  We can do better. We the People are being lied to at multiple levels: the highest level is the facts; the middle level is the assumptions; and the bottom level is the model. Neophytes argue about the data; journeymen argue about the assumptions; real masters dissect and then reset the model.  The budget of the United States is not being presented to We the People in an accurate and actionable fashion.  Congress does not receive intelligence support (decision support) across the various jurisdictions, one reason that intelligence reform is emphasized in the chapter on the substance of governance.  The Congressional Research Service (CRS), I am sorry to say, produces lightweight pabulum and does very little heavy lifting in the way of original discovery and analysis.

Below is a second look at the graphic from the earlier chapter, one that no one in the government is aware of, because it was developed for a forthcoming book by Medard Gabel (co-creator with Buckminster Fuller of the original analog World Game, and designer of the new digital EarthGame™), Seven Billion Billionaires, in which he documents his rigorous research and the findings summarized here.  E. O. Wilson, writing in The Future of Life,[11] and Lester Brown, writing in Plan B 3.0: Mobilizing to Save Civilization,[12] both agree in general terms with these financial calculations.

We the People have been hurt by a national decision-making process in which secrecy, bribes, corruption, and partisan interests all conspired to spend our money—our tax contributions have been squandered and mis-spent “in our name” and not in our best interests.

Click on Image to Enlarge

The lies continue in this campaign, half from the candidates themselves, who never shirk from misrepresenting either the facts or the future, and half from corporate interests.  As I write, CNN is screening an advertisement that says that Congress is preventing drilling to save ourselves.  What the advertisement does not say is that the oil companies already have hundreds of thousands of acres with a known petroleum reserve, and they are refusing to drill there, holding out  for new land, more land.  And to give Senator Barack Obama his due, even if we started drilling today in existing approved lands, it would be years before that came online, whereas Boone Pickens is absolutely right: natural gas is here, now, and it belongs to us.

We the People have been separated from our government, our money, and our values.  What has been done in our name; the manner in which our money has been spent in our name, has been severely inimical to the prosperity and security of the United States of America.

The candidates are not being truthful with us, in part because neither one of them has a clue.

It’s not real until the budget is obligated and outcomes achieved.

None of these candidates have a budget, and none of them have a strategy or a vision for specific outcomes—not a single one of them can coherently describe how they will guide this Republic in assuring a prosperous world at peace in which our children and grandchildren can aspire to life, liberty, and the pursuit of happiness forevermore.  I address this further in the final chapter.



[1]  David Walker was consistently honest, transparent, and rigorous.  His varied testimonies and presentations remain a matter of public record at http://www.gao.gov/cghome/dwbiog.html.

[3] “Chinese Government is Top Foreign Holder of Fannie Mae, Freddie Mac Bonds: $376 Billion in Chinese Agency Bond Holdings Subject to Taxpayer Bailout Proposals According to FreedomWorks Analysts, MarketWatch (Last update: 11:08 a.m. EDT July 11, 2008)

[4] Earth Intelligence Network, certified by the IRS from 12 January 2007 as a 501c3 Public Charity, is devoted to creating public intelligence in the public interest.  I will not address what it does in this book—everything at the website, www.earth-intelligence.net, is free.

[5] Michael O’Bannon and Donald Gessaman, Understanding the Budget of the United States Government (EOP Foundation, 2008).  The book is no sold on Amazon—it can be ordered directly from the EOP Foundation, 819 7th Street, NW, 4th Floor, Washington, D.C. 20001, or call Mr. Randy Ramson at 202.833.8940 to pay by credit card.  The book, at $49.99, is a real treasure.

[6] Going by the name of Farcaster, this is a very thoughtful individual.  Visit Farcaster’s user page at Wikipedia to read his itemization of the top threats to the USA as Farcaster sees them, and some of Farcaster’s favorite quotes.

[7] From Wikipedia

[8] Emphasis added.  From CATO Institute front page on 17 September 2008.

[9] My colleagues have spent years researching this, and have found legal means of dropping those costs to 1% (one percent) of what we pay now and what we have agreed to pay in the future because corrupt Senators and Representatives were bribed to forbid negotiation on price in the law.

[10] I lost the attribution and believe it was from one of the centers for defense information back in the 1990’s.  In any event, here is a more recent similar calculation, with attribution and an image:  Personnel $93B, Operation and Maintenance $144B, Family Housing $4B, Procurement $62B, Research and Development $51B, Construction $6B, Misc. $2B, Retired Pay $39B, DoE Nuclear Weapons $15B, 50% NASA $7B, Coast Guard $6.7B, Internat’l Security $6.7B, 50% FEMA $3.5B, FBI/CIA $.7B Past Military, $339B: Veterans’ Benefits $57B; Interest on National Debt (80% estimated to be created by military spending) $282B Human Resources, $540B: Education, Health/Human Services, HUD, Food Stamps, Labor Department, Soc. Sec. Admin.General Government, $278B: Legislative, Justice Dept., State Dept., International Affairs, Treasury, Gov’t. Personnel, 20% interest on national debt, 50% of NASA, Bipart. Econ. Plan Physical Resources, $102B: Agriculture, Commerce, Energy, Interior Dept., Transportation, Environmental Protection, Army Corps Engineers, FCC, 50% FEMA.


[11] E. O. Wilson, The Future of Life (Vintage, 2003)

[12] Lester Brown, Plan B 3.0: Mobilizing to Save Civilization (Norton, 2008).

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