Food for Thought
What number is 10,217,023,029,529? No, it’s not the largest known prime number recently discovered by mathematicians using powerful computers. It was the amount of the gross national debt at the moment I wrote the number and in the meantime it has grown by almost $10 million. If you are like me and have been trying to make sense of all the big numbers being thrown around these days, it’s nearly impossible. Thanks to my good friend Gray Maxwell, a senior US Senate staffer on Capitol Hill, I have a way to bring the enormity of the situation home by casting the numbers in terms of our city and as individual citizens and thinking about what we could buy with that money.
In order to easily understand these numbers I will round them off. I will use a figure of 300 million for the US population and 1 million for the population of San Jose. So, for instance, the national debt figure will round off to $10.2 trillion, making San Jose’s share $34 billion which is $34,000 for each and every one of us—man, woman and child. If you are a family of four, that equals $136,000 for your family. There’s more. Because of deficit spending, the debt is rising by an average of $3.6 billion each day or more than $1 trillion per year, or about 10% of the total. So at the current rate, in the coming year San Jose’s share of the increase will be $3.4 billion or $3,400 each. (This figure includes the interest on the debt.)
The size of our national debt has doubled since George W. Bush took office. The 50 percent of the current debt that that figure represents is equal to the amount financed by the Chinese government. That means each of us is indebted to the Chinese to the tune of $17,000.
The current ratio of national debt to Gross Domestic Product (GDP) is 70 percent and rising. It was at its lowest in the last 50 years during the Carter administration in 1980 when it stood at just above 30 percent. It rose steeply during the Reagan and Bush I presidencies to 68 percent because of deficit spending. During the budget surpluses of the Clinton presidency, it fell to below 60 percent, and has steeply increased again since Bush II took office. The budget deficit is nearly $600 billion per year now—$2 billion for San Jose or $2,000 per person.
So, how did this happen?
First of all, there is the war in Iraq. With projected spending in the coming year, the war has cost the taxpayers nearly $800 billion so far. San Jose’s share is $2.6 billion or $2,600 per person. Further costs of military activity, veteran’s benefits and rebuilding the infrastructure of Iraq that we have destroyed has been estimated to add another $2 trillion in the foreseeable future. The $3 trillion price tag for Bush’s war will end up costing San Jose citizens $10 billion or $10,000 each.
The tax cuts for the wealthy are by far responsible for the biggest slice of the debt increase. They have added almost $3 trillion to the national debt and account for nearly half of the budget deficit. That’s another $10 billion for San Jose or $10,000 per person. The sort of people who got these tax cuts would be like Lehman Brothers CEO Richard Fuld who took home half a billion dollars while Bush was president. This is the guy who unapologetically testified before Congress this week and told how Lehman Brothers paid out $20 million in executive bonuses FIVE DAYS before declaring bankruptcy. Or AIG CEO Martin Sullivan who took his senior executives on a weekend junket to a luxury spa that cost $500,000 a few days after being taken over by the US government—paid for by us, the taxpayers.
As we all know by now, our economy is tanking because of corruption, deregulation and lack of responsible oversight by the Treasury Department, White House and Congress. We have just been asked to pay a $700 billion bailout for Wall Street. That’s a $2.3 billion cost to San Jose citizens or $2,300 each. Since this has had little impact on the faltering economy, it seems likely that we will be asked for more. Where is it going to come from? If you are wondering what $700 billion could pay for, try these as a for-instance: This amount would allow us to repair all of our nation’s 77,000 deteriorated bridges and still have $519 billion to spend; or it would allow us to rebuild all of our nation’s 33,000 deteriorating schools and still have $664 billion to spend; or it would pay for 27 million, four-year college scholarships. Think what we could do with our $2.3 billion share in our city.
The reason for this bailout has been given as the subprime mortgage scams perpetrated by Wall Street. I have some figures on that. There are $1.5 trillion in total subprime mortgages. That figure represents a small 6.8 percent of all outstanding loans. The default rate has reached 25 percent, or a value of $375 billion. (Since we are being asked to cover $700 billion, I am assuming the Treasury is projecting a nearly 50 percent total default on these loans. Something smells fishy in this deal. Why don’t we just help the defaulters as necessary?)
In the past year, we Americans have lost $2 trillion from our retirement funds, 401Ks and the like. We have seen the value of our homes decrease by more than 25 percent and even a great deal more in some parts of the country. Consumer prices have increased dramatically and health insurance costs have doubled in the last eight years. I know that I am spending twice as much for gas and 30 percent more for groceries this year than I did last year. If you have tried to cushion yourself with savings like I have, the interest you are getting is miniscule and, given the true rate of inflation, very costly. The government official rate of inflation of about 5 percent and unemployment rate of 6 percent are hogwash. I don’t think anyone knows what the true inflation rate is. The new standard of establishing a national unemployment figure is to count only those registered on the unemployment rolls. In doesn’t count the long term unemployed or those who have given up. Measured by the old standards, unemployment is now nearly 15 percent. By that measure, we are in a depression.
If you are seriously worried about the current situation and are thinking of taking your money out of the bank and stashing it under the mattress, I don’t blame you. I have thought of that too. Unfortunately, we will have to think again. Here are the numbers on that:
There are deposits in US banks of somewhere around $5 trillion. There is a total $829 billion in cash Federal Reserve Notes in circulation in the world; typically two-thirds of that is outside the country at any one time. So that means there is less than $280 billion in total cash in the entire USA to cover $5 trillion in deposits. That is less than 1 billion dollars of cash in San Jose or less than $1,000 for each person. If you are worried about collapsing banks and feel reassured that the FDIC insurance is able to cover everyone up to $250,000, think about this: There is a total FDIC insurance fund of cash on deposit of $55 billion. That is barely more than 1 percent of total cash deposits in the country.
I don’t know about you, but I look at these figures and it seems clear that if we don’t come up with a solution fast we are in deep shit. Our country is on the verge of bankruptcy and our economy is collapsing and taking the rest of the world with it. This week has seen the collapse of the Icelandic economy and the central banks of the EU intervening in the crisis there. The dominant German economy is in a terrible state. Yesterday the British government nationalized a large part of their banking system which is what I believe we ought to be doing here and probably will have to do in the near future.
There are two bits of good news in the worst-case scenario. One, the war in Iraq will be over and the soldiers will be coming home because there will be no money to pay for war. Unfortunately, they may not have a job to come home to. Two, it means the end of the corrupt, unregulated capitalism that brought us to this point and that crooks like Richard Fuld and Martin Sullivan might go to prison.
Oh, and while I wrote this piece, the national debt increased by
$859,557, 892. That’s $2.87 million for San Jose. Your share of that is $2.87.
Jack makes some good points re: scope of financial mismanagement, but lets his DNC talking points get in the way of deeper insight. As the sage Michael Malone points out in a recent essay,
“From where I sit, the United States government has embarked on two pieces of social engineering in the last few years. One was to make oil expensive as expensive as possible to drive people to greater use of alternative energy sources – because anything less would be irresponsible and destructive to the environment. The other was to enshrine home ownership (i.e., easy-to-obtain mortgages) as a new American right – because anything less would be unequal and racist.
None of us voted on these decisions – indeed, neither was even spoken about directly, much less debated. But nevertheless, both became national policy… and both have sparked national, now international, crises. Then, once they became crises, both were blamed on ‘greedy capitalism’, instead of what they really were: legislative interference into market forces.”
Read the whole thing:
http://pajamasmedia.com/edgelings/2008/10/03/the-end-of-an-era/
I agree. This problem is too big and too serious to simply blame on George Bush. It’s a bipartisan fuckup of monstrous proportions. Democratic overspending on domestic entitlements and government incentives to get poor people to buy homes they couldn’t afford contributed also. I look forward to an impartial analysis of what went wrong, but this is not it.
Greg #1
You are right that there is enough blame to go around for both parties. That’s why I did not even mention them and only use the presidential terms from Carter to George W Bush to set time periods with regards to economic activity. We citizens must share the blame as well. And there are many more things like the Medicare giveaway to drug companies that could be added to the list of deficit-increasing items, but if I listed all of those, I would never finish this column! They are all included in the totals I have given. It should be noted that on the credit side of the national balance sheet, there is more than $5 trillion in trusts from Social Security, Medicare, gas tax etc collections. However, these cannot be used to cover expenditures on anything other than those functions for which they have been collected, so they do nothing to alleviate the gross national debt problem.
What’s the unemployment rate in government ?EBay is laying of thousands. Is the federal government laying anyone off, are state governments, local governments?
Some facts for your discussion (from the IRS):
-The top 5% of earners (> $153,542) pay 60% of all federal income taxes
-The top 1% (> $388,806) pays 40% of all federal income taxes
-The top 1% provides 17% of all federal revenue
-30% of voters pay 0% in federal income taxes
So, when people reference tax cuts for the wealthy….are they well intentioned people who are just mis-informed about how our tax system works? Or are they purposely misleading people? I hope it’s the former.
Court filings don’t lie either.
Here’s one in which the Chosen One himself shakes down Citibank in 1995.
http://www.mediacircus.com/2008/10/obama-sued-citibank-under-cra-to-force-it-to-make-bad-loans/
On a lighter note, a pundit compared the congressional investigations to find the culprits responsible for the financial meltdown to OJ Simpson’s quest to find the murderer of Ron Goldman and Nicole Brown.
If only we could convert congressional chutzpah into energy!
San Jose city government talks about reducing hundreds open vacant employee positions in last 5 years but city has NOT laid off ANY city employee because of Council’s “No Layoff Policy”
San Jose will NOT lay off any city employees if voters do not approve 2 San Jose city taxes, but will reduce 500 city employees by early retirement( 75-90% retirement pensions)
Taxpayers pay for public employment perks ( NO Layoffs, Very High salaries, benefits and retirement plans) unavailable to private-sector employees while working 10-20 years longer than public employees
Sacramento Bee said surest, easiest and no risk way to become millionaire in California is to be government employee
Government is being run to unfairly enrich government employees and elected officials not benefit of public or taxpayers
#6
It’s just like the IRS to give only half of the story. Without corresponding comparative income data, percentage of total taxes paid is meaningless. Here is where readers can get the complete story and make up your own minds:
http://www.taxfoundation.org/news/show/250.html
In a perfect world…Bush would resign, Paulsen would be fired. Barney Frank, Dodd, and Cox would also be kicked out of office. Instead, the architects of the problem get to stay and engineer the solution to the problems that they helped to create.
There are no rules, and no consequences for breaking the rules.
Still, I believe that we’ll recover, we always do…but it might take a few years.
Pete campbell
Rose Garden Dad, thanks for posting that link.
“The tax cuts for the wealthy are by far responsible for the biggest slice of the debt increase.”
Are you actually serious? So it has nothing to do with spending like drunken sailors in the face of a cripling deficit… Instead the problem is that our federal overlords failed to confiscate enough money from the populace? Good grief.
HJ#3 wrote:“Democratic overspending on domestic entitlements and government incentives to get poor people to buy homes they couldn’t afford contributed also.”
Entitlements, like earmarks, need to be purged from our lexicon and from Congressional prerogative.
We are entitled in this world to no more than equal opportunity to succeed. And when we screw up, we need to reap the consequences. Not so for AIG, or WAMU,, etc., though, the way things work in Congress and The White House.
It’s too bad that there isn’t a group out there that could take the time and spend the money to see how much time and money is wasted in government at all levels.
There is no easy way for the private citizen to ascertain how much time and money is wasted by such a simple thing as all the staff time and effort to make sure each member of Congress and the Senate get their share of time on C Span holding jerk-off hearings on god knows what and to what end.
Government needs to be dismantled slice of pork by slice of pork; and much of the pork is sliced off by our so-called representatives.
The recent AIG pool & spa party at the St. Regis in Dana Point CA to the tune of $450k is NOTHING compared to the freebies that each and every member of most government bodies—particularly the Congress and big-state government honchos—get every damn day.
I am a very fiscally conservative/socially liberal guy, and I want another damn Boston Tea Party.
I am fed up and frustrated. Fed up is easy to understand. Frustrated by the fact that there just isn’t a damn thing any single one of us can do about the cluster f#ck that we call our national government. They are virtually to a person corrupt, self-serving leeches who suck off the public. They think they are ENTITLED to all the perks they get. They are completely out of touch with everyone who is not a campaign contributor. Every once in a while someone like Ted Stevens goes beyond even their very forgiving rules; but the difference between Ted and the rest of them is merely quantitative, not qualitative. They all march to some special interest drummer, but refuse to admit it.
When the word “entitlement’ hit our language, the rest of us were doomed.
McCain is a doddering anachronism who caved to the religious right and allowed the selection of a VP who panders to a crowd with which I cannot identify (but some people can); except that she is personally engaging…as long as you don’t delve too deeply into her “message”
Obama is an opportunist of the first order who is perhaps the best orator this country has produced since William Jennings Bryan; but who at the end of the day is an empty suit with contacts as questionable as those of Jimmy Hoffa, and every governor of Louisiana or mayor of New Orleans in modern times. His so-called record is…well, it just isn’t.
Nader is an egomaniac who is best compared to Al Davis—a guy who had great ideas 25 years ago, and still holds fast to them today despite the fact that the world has passed them both by a decade or more ago.
And so where are we, folks?—we’re royally screwed!
But rest assured, no matter what party controls the Congress, no matter who is President, the vast majority of us will have to bend over and grab our ankles and “take it like a man” while we watch the big boys, who contribute big bucks, get bailed out.
I’m 62 years of age. I’ll be dead before it all comes crashing down. The children of my generation are in trouble. The grandchildren of my gneration are competely screwed unless we have another Boston Tea Party…globally.
#3 wants an impartial analysis. Don’t hold your breath, HJ.
#13 JohnMichael
Where do we RSVP for that global Boston Tea Party? I’m in.
Let’s put the blame directly where it belongs.
Everyone who voted for George Bush, supported George Bush, and continues to support George Bush is at fault for this mess.
#13 JohnMichael,
Amen, brother!
The problem is more bipartisan than that.
Iraq and the tax cuts add tons to the debt. So does the Medicare prescription drug benefit.
Lax regulation helped create the financial crisis. So did the implicit federal guarantee of Fannie Mae and Freddy Mac.
Add in our past history of bailing out companies that are “too big to fail”. Federal pressure on Fannie and Freddy to relax lending standards didn’t help, either.
Neither party has a reasonable claim to fiscal sainthood here.
Even when Dems rail against corporate excesses, it’s rarely about fixing the rules so that CEOs can’t loot their own companies. Instead, they want to have the CEOs pay more taxes AFTER they loot the company. Arguably a good idea, but it doesn’t do much to help people’s IRAs and pension plans.
#15 trots out the gratuitous Bush-bashing, pretending that Bush was able to single-handedly cause this mess by himself. Fortunately, most people realize it goes beyond Bush, and that both parties are responsible. Peggy Noonan sums it up this way: “Neither party has clean hands. Or rather, both parties have dirty hands. Here is the truth, spoken by the increasingly impressive Sen. Tom Coburn: “The root of the problem is political greed in Congress. Members . . . from both parties wanted short-term political credit for promoting homeownership even though they were putting our entire economy at risk by encouraging people to buy homes they couldn’t afford. Then, instead of conducting thorough oversight and correcting obvious problems with unstable entities like Fannie Mae and Freddie Mac, members of Congress chose to . . . distract themselves with unprecedented amounts of pork-barrel spending.” That is the truth.”
http://online.wsj.com/article/SB122359863551021415.html
Things won’t get better until both parties own up to their share of the blame. This will not happen. Watch for more bailouts, higher taxes, and a general collapse of the economy.
Bend Over, Here It Comes Again!
Jack #14—I think we ought to have it at The St. Regis in Dana Point, where AIG execs went recently to party like it’s 1999 on our dime to the tune of over $425k. Besides, it’s only a few miles from where my fixed-income Mom lives, and both she and I were born just outside of Boston.
D.O.A. #15: Are you saying we have out-surrendered the French?!!! Sacre Bleu!!!
#17
Let us not forget the greed of executives in their never ending quest to increase “shareholder value” (translation: line their own pocket) where they have outsourced our future.
Outsourcing of engineering jobs should be considered one step below treason since it gives foreign companies easy access to our technology. Any executive who outsources should be treated as a traitor.
Well, the panic on Wall Street remains unchecked…and now it has spread worldwide.
Every broker/financial adviser commercial you hear or see or read in any medium stresses looking at the long term, buy and hold.
Yet, Mutual Funds, pension plans, traders, etc all seem to do the opposite—trading BILLIONS of shares/day in the hope of making a bit of dough off the short term spread. It’s as much gambling as pai gow.
I have a proposal. Every day trade profit will be taxed at a minimum of 80%. Every day trade loss will also be taxed—50% of the total share value traded. That may help stop the speculators.
If you hold your shares for a week, the tax goes down to 50%. If you hold the shares a month, it’s down to 30%.
We need to punish the manipulators who have made the daily tracking graph of the DJIA 30 and other benchmarks look like a roller coaster ride.
Many retailers are still making money, but the stock folks haved panicked and made everyone’s lives miserable.
I’m very Old Testament—punish the malefactors.
#13 John M. I’d like to know who has money to buy Tea for this party? A parking ticket would take most folks over the top!
The treasury has been depleted.Our recyclable metals and materials have been gobbled up by China. The process of surrender has never, in the history of man been more complete. We allowed ourselves to become who we are. Let’s start there.
Th party is definately over. With winter comming find a warm body and hibernate!
D.O.A.
#21
I like your tax idea. I have always said that buying stock is like buying a lottery ticket. If you win then great, but don’t whine if you lose. These scumbags act like they are guaranteed a profit.
My idea to put a stop to these short-term bastards was to ban selling stock until you own it for 6 months. Stock is supposed to be a long term investment, not a short term gain.