Mathematically Assured Depression

Mutually Assured Destruction (MAD) was a doctrine of the Cold War (1950s to 1990s) in which MAD was seen as helping to prevent any direct full-scale nuclear conflict between the United States and the Soviet Union. In other words, it was a lose-lose scenario for both countries if either one attacked first.

Our economy is on a government-induced lose-lose trajectory of financial destruction between federal spending and tax revenue. It’s a Mathematically Assured Depression (MAD). The only unanswered question is when.

The most recent spending binge by President Obama and Congress will accelerate its arrival date. Although Congress and the president are not acknowledging this conclusion, the mathematical facts that support this conclusion are simple and undeniable.

Even though the Bush tax cuts delayed the inevitable, we are in a technically defined recession plus much more. The inability of Congress and Presidents Clinton, Bush and now Obama to stop the spending has made the coming depression a certainty.

Congress and the president have denied the facts below because this information would not attract many votes for election or re-election. More importantly, these facts do not support the rhetoric of class warfare, the mindset of denial or the doctrine of delay – namely, blame it on the previous administration and let the next Congress deal with the problem.

That’s the other problem. This has gone on for decades and we have now run out of delays.

These undeniable and well-documented facts also do not support the notion that we can spend our way out of this financial crisis, nor can we tax the rich and businesses enough to solve the financial problems we face. The numbers just don’t add up, and the dynamics of government spending and taxes have not changed.

Federal programs must be restructured and spending capped, while the economy is allowed to grow. More spending and more taxes have never worked in history.

The facts speak for themselves, but the people who can do something about it are not listening. We the People will have to shout a little louder.

Here are some facts about federal spending, courtesy of the Heritage Foundation.

• Federal spending is growing faster than federal revenue.
• The average annual deficit since 1965 is $168 billion. The 2009 deficit is $1.7 trillion!
• Per-household federal spending is near an all-time high. It was $20,500 in 2000, rising to $23,500 in 2007.
• Federal spending has grown nine times faster than median income since 1965. During that period, median income increased 35 percent, while federal spending increased 334 percent.
• Entitlements will consume all tax revenue (18.4 percent of GDP) by 2052.

Now just in case you think more federal revenues are the solution to the problem, here are some facts – from the same source – that will demonstrate otherwise:

• Raising taxes is not the solution to the entitlement spending tsunami. If Congress does nothing, all spending will exceed all revenue by 2025.
• In 2008, individuals paid $1.2 trillion in federal taxes, while corporations paid $345. Total revenue to the federal treasury was $2.5 trillion.
• Tax receipts were 18.5 percent of GDP in 2007, surpassing the 60-year average, and are estimated to have declined to 17.6 percent in 2008 due to the slowing economy.
• If you think the answer is raising taxes on corporations, understand: The Bush tax cuts of 2001 and 2003 caused the share of federal revenue represented by corporate income taxes to rise from 1.2 percent of GDP to 2.7 percent – a total dollar increase of $210 billion.
• If you think the answer is raising taxes on the rich, understand: In 2006, the top 10 percent of all income earners paid 71 percent of all federal taxes. The bottom 50 percent paid 3 percent of all federal taxes.