Dirty Little Secret About the Budget

The US Government cannot pay it's bills. The credit card is maxed out. The Administration, Wall Street, and many of the Democrats in the House and Senate are begging for a credit limit increase on our collective Visa card known as the debt ceiling.

The Republican party, particularly the Tea Party wing, are insisting on very real budget cuts without tax increases, before they will consider any debt limit increase. In addition, they are demanding an amendment to the Constitution that requires a balanced budget. Why this insistence on cuts and other measures to be sure of lower spending prior to allowing the government to borrow more money? Because the one thing Congress, and especially this Administration, never does is spend less money. The Democrats are telling everyone that the must have tax increases on the “Rich” in addition to spending cuts to begin to bring our budget into balance. The “millionaires and billionaires” must pay their fair share and share some sacrifice they tell us. There are several problems with this statement, however. First of all, they are not really talking about millionaires and billionaires. There isn't enough money there. What they are talking about is wage earners who make over $200,000 per year filing separately, or $250,000 if filing jointly. According to the IRS, in 2008 3.4 million taxpayers reported adjusted gross incomes between $200,000.00 and $500,000.00.

According to the IRS, in 1992, the top 20% of wage earners paid 65% of the income tax. In 2001, when the top rate was 39.5% the top 10% of wage earners paid 64% of the income tax, and in 2008 when the top rate was 35%, the top 10% of wage earners paid 70% of the tax. The threshold for this 10% is an adjusted gross income of $113,799.00 per year. That is not what I would call excessively rich. The interesting thing about this is that the bottom 50% pay 3% of the tax, meaning that the other 40% of taxpayers with adjusted gross income between $33,048.00 and $113,798.00 pay 27% of the total income tax collected by the IRS. The percentage of tax paid by the bottom 50% has been steadily DECREASING since 2001. Federal Revenues have fluctuated from 2.0 trillion to 2.56 trillion in the years 2005 through 2010, peaking at 2.56 trillion in 2007, and dropping to 2.16 trillion in 2010. Spending, however, has steadily increased from 2.4 trillion per year in 2005 to 3.8 trillion per year estimated in 2011. The question we REALLY need to be asking, is where has that extra TRILLION dollars per year since 2008 gone?


The dirty little secret is this, in 2008 we were told that we had to pass a temporary stimulus package of nearly a trillion dollars to keep the unemployment rate below 8%. The money, we were told, would be spent on “shovel ready” projects which would put people back to work. Since then the unemployment rate peaked at over 10%, dropped down to 8.9% and has now risen back to 9.2%. Real economic growth has stagnated at a meager 1.8%, and our national debt has grown to nearly 15 trillion dollars, or 102% of GDP.

The secret is that this stimulus money isn't temporary. While the democrats claim that they can't cut the budget without throwing grandma out into the street, or starving children with autism or some such other gut wrenching evil, the fact is that 861 billion dollars is simply an increase in spending in several programs over the 2007 levels. (data obtained from the Government Printing Office). The level of spending was too high then. Granted some of the increase is in Medicare, Medicaid, Social Security and Unemployment benefits, and those programs must be addressed, but I don't recall too many stories in the national press about folks starving in the streets in 2007. Government spending equals power in Washington DC, and those folks are loath to give up any power, so the spending, and the borrowing from our children and grandchildren continues unabated.