March 19, 2012

Why the Federal Budget Matters

Antony Davies

Senior Affiliated Scholar
Summary

The U.S. credit card is maxed out, but politicians still want to go on a shopping binge.

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This excerpt was originally published in US News. View the full article here.

House Republicans are expected to release a budget today that includes more than $1 trillion in discretionary spending—the part of the budget that includes everything except mandatory programs like Social Security, Medicare, and interest on the debt.

Congress will debate whether discretionary spending should be $1.03 trillion or $1.05 trillion this year. This debate is like having a $50,000 a year job and quibbling over whether the Porsche you're about to put on your credit card should have leather or cloth seats. The question doesn't matter because you can't afford either one. Even if Congress were to cut discretionary spending to zero, the budget still wouldn't balance.

Related video: What Are the Dangers of Too Much Debt? (via Learn Liberty)

  • As of 2011, the U.S. Government owed $10.1 trillion in corporations, people, and foreign governments, and $4.6 Trillion to the Social Security Trust Fund.
  • This doesn't count around $50 trillion for planned future expenditures. -We pay 3% in interest right now, which amounts to $440 billion in yearly interest payments.
  • This is three times the annual cost of the Iraq/Afghanistan Wars -If the rate went up to 4% (where it was 3 years ago), we'd pay $587 billion, or 4 times the annual cost of the Iraq/Afghanistan Wars.
  • If the rate went up to 6% (where it was ten years ago), we'd pay $881 billion, equal to World War 2's annual cost. -If the rate went up to 8% (where it was 20 years ago), we'd pay $1.175 trillion, equal to the annual costs of all of the wars we've ever waged, combined.