Obama Administration Drops a Deficit Grenade (1)

The Obama administration of hope and change went along with cynical Washington tradition today when it released shocking news on a Friday afternoon in August, after most reporters had gone home because the President had left town on vacation.

The Administration’s official, ten year, budget deficit projection, already catastrophically high, just grew by a staggering 26%, from $7.1 Trillion to $9 Trillion.  This shortcut number format tends to dull the senses so here are the same figures in full numbers:

Previous 10 year deficit projection: $7,100,000,000,000

Revised 10 year deficit  projection:  $9,000,000,000,000

Yearly average:                                   $900,000,000,000

For perspective, here are some numbers to compare with:Obamanomics-debt

  • This year, fiscal 2009, the federal government will collect $952 Billion in personal income tax, from all taxpayers, including the rich and the middle class.
  • This year government will collect $1.8 Trillion in revenue from all sources, including income tax, Social Security tax, Medicare tax, corporate income tax, and gasoline tax.
  • The deficit was the major issue in the 1992 Presidential Campaign, costing George H.W. Bush a second term.  The deficit in 1992 was $290 Billion.  Adjusted for inflation to today’s dollars it would equal $439 Billion.
  • Candidate Obama stridently campaigned against “irresponsible Bush deficits.”  The largest deficit of the George W. Bush administration, was $455 Billion.  Obama now expects us to accept routine, annual deficits that are double Bush’s largest.
  • Total Defense Dept. Budget for 2008, including Iraq and Afghanistan, and world wide war on terror: $596 Billion

These projections do not include the cost of ObamaCare.  They were formulated by administration accountants, using the most optimistic assumptions possible.  The actual deficits are virtually certain to be larger.

There is simply no possibility of ever collecting enough tax revenue from future generations to pay off the staggering debt the Obama Administration intends to accumulate.  The only option will be to “monetize” the debt by creating hyper inflation, so these borrowed dollars can be repaid with depreciated dollars of 1/4 or 1/8 value.  The Federal Reserve causes inflation virtually every year.  It can and will cause the hyper inflation necessary to reduce the burden of this debt.

The consequences of hyper inflation will likely be a dramatic decline in the American standard of living.

  • The value, or purchasing power of personal savings and retirement accounts will sink with the dollar.
  • Consumer debt will soar as citizens remember the lesson of the last period of high inflation, the 1970s: “it’s better to owe a dollar than to own one.”
  • Interest rates will be at record highs as lenders seek to offset the expected decrease in the value of the dollars they will be repaid.
  • Americans are accustomed to buying high quality, imported goods with dollars.  There will come a time when manufacturers in China, South Korea, Mexico, and Japan will refuse to accept rapidly depreciating dollars in exchange for their goods.
  • Oil exporting countries, including our largest oil supplier, Canada, will refuse to accept dollars in exchange for oil.  Gasoline prices will rise even more rapidly than other consumer prices.

It’s time for a new set of priorities.  Instead of burning through borrowed money to fund authoritarian take-over schemes like ObamaCare, the government’s number one priority should be to scale spending back to a level citizens can afford.

1 Comment so far

  1. theCL on August 22nd, 2009

    I learned long ago … don’t buy what you can’t afford. And “we the people” can’t afford this Leviathan that our government has become.

    The inflation is already hitting us. It’s what has driven up the stock market. It’s rather frightening, but hyperinflation is a real possibility … and it’s the odds on favorite to boot.