The Federal Budget, Debt, Sequestration, or How A Nation Commits Suicide

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Sequestration is coming. No, I’m not referring that pointless debate which took place in the Fall of 2013. I’m certainly not referring to those occasional budget debates which play out from time to time. You know, the debates where Republicans pretend they’re going to reduce a projected increase in spending, the Democrats pretend to be outraged, and the Republicans whimper about how they’re not trying to starve children. Those debates.

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Three years ago, spending “cuts” included in the Budget Control Act of 2011 (BCA) were to be implemented. The “sequestration,” verbiage was designed to force the legislative and executive branches to come to terms with monetary realities. As if.

Stay vigilant because the coming fiscal year of 2017 looks to be no better. No surprise, but as long as the Party of Cowards and the Party of Santa Claus continue to find common ground, we can expect more of the same. The budget submitted by the Whitehouse earlier would push this year’s deficit to $616 billion. That’s an increase of $178 billion over last year.

Our accumulated national debt exceeds our Gross Domestic Product (GDP) – that’s the entire economic output of the United States. The 2015 report issued by the Office of Management and Budget spells it out in raw numbers:

Table S-1, page 163: GDP for 2015 – 18.219T

Table S-13 – page 208: Total Federal Debt – 18.713T

Federal debt as a percentage of GDP – 102.7%

Reflect for a moment. The OMB, beholden to the Administration, possessing every reason to spin these numbers dizzy, has freely admitted to a shattering failure of fiscal discipline, reporting our National Debt to be in excess of our economic output by nearly 3%.

If the OMB will admit this much, what does that tell you?

That it’s probably worse.

One does not have to be an economist (and I’m not) to know that there is a point at which this system will collapse under its own weight. At some point the United States Government will cast about for someone to lend it money only to find none willing.   Because at some point would-be lenders, having employed very smart actuaries, will conclude that there’s just not enough potential man-hours of labor available to convert to the necessary capital. This will be the real sequester, and the options of those who would govern us will be few:

Default. Here the government will simply walk away from its contract with its creditors. Those holding onto the U.S. Treasury Bills and Bond will find themselves in possession of worthless paper. The consequences will be cataclysmic in terms of the “good faith” and credit which is supposed to back up our currency. It’s happened before.

Devaluation. We can inflate our way out by simply printing enough money to cover the National Debt. Desperate nations have done this before and the tragic historical examples of this practice fills volumes.

Or, we can simply accept Austerity. Stop counting on unrealistic economic growth projections. They didn’t come true in the last decade, and they won’t happen in the coming decade. Raise taxes on everyone. A lot. Cut the federal budget. A lot. This means that every dollar, and I mean every dollar going out to every contractor, every paycheck and every bill gets cut by one penny. Rinse and repeat for the next 6 – 10 years. This will cause a great deal of pain, but at least you’ll have a functioning society. Regrettably, I fear we do not possess the national will.


About Phil Christensen

The trail behind me is littered with failure. The trail before me remains to be seen.
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10 Responses to The Federal Budget, Debt, Sequestration, or How A Nation Commits Suicide

  1. Susan Schiller says:

    I agree. The last time we voted for Congressmen to represent us, Republicans won seats that were once occupied by Democrats because we realize we need a change and thought that was the way to do it. Sorry to say, to date, those congressmen that were voted in haven’t done much to garner change and now it’s the Senators turn. I’m hoping that the Republicans will win seats to the senate and still hoping that they will draw that line in the sand and say, thus far and no more and do the hard things to turn this nation around. I vote Republican because they still stand for principles that I stand for as well and I will continue to pray that God will grant us a President that also embraces godly principles and stands by Israel unwaveringly. I will never say that it is not worth it to vote so we will continue to vote and hopefully our leaders will embrace austerity and go from there. Sometimes the choices are hard but we are a great, resilient nation and we need to come back from the last eight years with a President that is throwing this nation down the toilet and our elected representatives as they stand today are watching him do it.

  2. Ann Brooks says:

    Phil, Thank you for your insight and information. The American people need to pay more attention to what has happened in country that has sent the national debt soring. Are we a nation that is so caught up in give aways and spending carelessly until we fall? It is going to take electing the right people and making our voices heard to change our economical problems. It will take tightening our belts and being more financially accountable.

  3. Randy Duncan says:

    They will put it off as long as they can by devaluation. They like to call it quantitative easing which is just another way of saying dump more money into the economic system which of course devalues the dollar. It will lead to massive inflation which will hurt the poor the most. In effect it will be a massive tax increase on everyone including the poorest among us. QE4, QE5, to QE99 who knows. Interesting stuff Phil!

  4. Joie says:

    Thank you for the info. This is one of the smartest things I’ve read in a week.

  5. Thanks in favor of sharing such a nice idea, piece of writing is fastidious, thats why i have read it completely|

  6. Yukiko says:

    Thank you for posting this. I don’t think most people know just how unsustainable this is getting.

  7. Andy Mount says:

    Phil,
    I fear that another tax hike will only fuel the monster that is already destroying this country and it’s economy. New taxes always become old taxes. Temporary taxes always become permanent. We don’t have a revenue problem, we have a spending problem.

    I agree that we need to cut spending and a good way to start is to eliminate the departments and organizations at the Federal level that the Constitution doesn’t authorize, like the Department of Education. It has a dismal record of achieving it’s goals.

    We need to do something about Social Security and Medicare and Medicaid. I know this is a landmine that will cause all kinds of difficulties but it isn’t sustainable and needs to be overhauled. It is a lousy “investment.” If I got the return on the money placed into it over the years in my private investment account I would have found another investment advisor long ago.

    The Federal Government is wasting our money on all kinds of things that the Founders never imagined. Keeping that money local makes it much more efficient and accountable. We need to return to the government that was imagined and formed by our Founders.

    We need to do it now.

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