United Liberty

The Treasury has released the 2009 Financial Report Of The U.S. Government, which is full of facts, charts and figures on the fiscal health of the country. Let me tell you, if you even have the slightest understand of basic economics, this report should trouble you.

I’ve pulled a couple of the charts to give you an idea of how screwed we really are. Let me be clear in saying that I am not blaming this on the current administration. They are, however, doing nothing to deal with the problem. In fact, they are doing what previous administrations have done…building on past fiscal irresponsibility with more fiscal irresponsibility.

This first graph shows that without major policy changes, debt as a percentage of gross domestic product (GDP) will exceed 200% in the next 35 years. It gets even worse as you can see below. Part of the reason is demonstrated in the next chart.

As you can see here (click to enlarge for better detail), interest on the national debt becomes more of a problem than entitlements, which is what many fiscal conservatives often talk about. This is a financial burden that cannot be solved by simply raising taxes, because with that economic growth is put at risk.

Over the last few decades, annual government spending as a percentage of GDP has been around 20%. However, In the next 20 years, spending as a percentage of GDP will hit 30% and it will just continue to grow.

Here is a look, thanks to Matt Welch over at Reason, at government spending over the long-term. The standard of government spending, until the last couple years, has been 20% of gross domestic product (GDP).

Thanks to booming entitlement spending, specifically in Medicare and Medicaid, the future does not look bright for taxpayers.

Well, this is no surprise:

WASHINGTON - The economy grew at a 2.8 percent pace last quarter, as the recovery got off to a slower start than first thought.

The Commerce Department’s new reading on gross domestic product wasn’t as energetic as the 3.5 percent growth rate for the July-September period estimated just a month ago.

The main factors behind the downgrade: consumers didn’t spend as much, commercial construction was weaker and the nation’s trade deficit was more of a drag on growth. Businesses also trimmed more of their stockpiles, another restraining factor

There will be at least one more revision coming next month, one wonders if the growth rate will be above 2.5 percent at that point.

The last day of the month brings what looks like good news for the economy:

The U.S. economy shrank at a more subdued pace this spring, the government said Friday morning, as the steep downdraft of the winter gave way to a more orderly contraction.

Gross domestic product, the broadest measure of economic activity, fell at a 1 percent annual rate in the April through June quarter, the Commerce Department said. That compares with a 6.4 percent pace of decline in the first quarter, a revision from an earlier estimate of a 5.5 percent rate of decline.

Investors are worried about the size of our debt:

The nation’s debt clock is ticking faster than ever — and Wall Street is getting worried.

As the Obama administration racks up an unprecedented spending bill for bank bailouts, Detroit rescues, health care overhauls and stimulus plans, the bond market is starting to push up the cost of trillions of dollars in borrowing for the government.
[…]
The trouble is that government borrowing risks crowding out private investment, driving up interest rates and potentially slowing a recovery still trying to take hold. That is why the Federal Reserve announced an extraordinary policy this year to buy back existing long-term debt — $300 billion over six months — to drive down yields. The strategy worked for a while, but now the impact of that decision appears to be wearing off as long-term interest rates tick up again.

President Obama is asking for budget cuts from his Cabinet:

President Obama plans to convene his Cabinet for the first time today, where he will order members to identify a combined $100 million in budget cuts over the next 90 days, according to a senior administration official.

The budget cuts, while they would account to a minuscule portion of federal spending, are intended to signal the president’s determination to cut spending and reform government, the official said.

Obama’s order comes as he is under increasing pressure to show momentum toward his goal of eventually reducing the federal deficit, even as he goes about increasing spending in the short run to prop up the economy and support his priorities.