United We Stand, Divided We Fall

It appears the President is taking a more reasoned and conciliatory posture in relation to resolving the debt crises.  We hope this attitude continues.  With the budget for the next 10 years presented by Representative Ryan in the House and endorsed by Mr. Boehner, we would hope the President, through a Senate budget, would present a counter proposal to Mr. Ryan’s budget.  That would give all an opportunity to move to the middle and seek a resolution to our budget crises.  Let’s hope that will happen.  We cannot wait much longer for the resolution to our $1 trillion annual deficit and our national debt at over $16.8 trillion.

Harry Pukay-Martin

I went to my barber last Thursday.   We discussed the sequestration and related matters.  Her view was that the Congress and the President should all take a pay cut.  They are not doing their jobs and haven’t passed a budget in many years.  If she did not do her job,  she wouldn’t receive any money, so fair is fair.  She also thought they need to balance the budget and come to a consensus on the steps needed to accomplish this.  She couldn’t run a deficit at home without severe consequences so why should they think in Washington that they can run a deficit without consequences.

We at United We Stand wholeheartedly agree with her.  As we state in our overview, the first steps are to have the President and Congress agree to cut their own pay as indicated below.

To set the stage and show leadership:

1. The President offers and requests that Congress pass budgets cutting his pay and that of his Cabinet Officers over 3 years by 20%(10% in 2013, 5% in 2014, and 5% in 2015).
2. The Congress, in a like fashion, passes budgets cutting the pay of Congress by the same amount over 3 years (10% in 2013, 5% in 2014, and 5% in 2015).  The 27^th Amendment to the Constitution prohibits Congressional pay from varying until after another election.  However, this can be overcome by legislation asking them to donate that portion of their salary back to the federal government each month.  For those that do not make the donation, the same legislation could have their staff budgets cut by 2 times the amounts not donated as well as provide for a vehicle to publicize their staff cuts .

3.  Pass budgets cutting the pay of all other senior leaders in the 3 Branches of our Federal Government by 10% over 2 years (5% in 2013 and 5% in 2014).

The second set of steps are to balance the budget over time as below.

Set targets for deficit reduction, budget breakeven, and debt as a percentage of GDP and pass legislation to enforce the plan.

Propose, review and implement changes in all areas of the budget as required by the agreed plan:

1. Propose, review, and implement tax changes.
2. Propose, review, and implement expenditure changes in all programs.

Harry Pukay-Martin

Robert J. Samuelson (my favorite economist and economic editorial writer) had an interesting and informative editorial commentary on February 25, 2013 about the US Debt and the complexity in counting it up. He notes that there are 5 different figures that a reasonable person could use in establishing the level of the US debt depending on what was included. The five are as follows:

Category                                                          Amount FY2012        % of GDP

1.  Treasury Debt Held by the Public              $11.3 Trillion              73%

2.  Gross Treasury Debt                                 $16.0 Trillion             103%

3.  Gross Treasury Debt                                 $18.9 Trillion             122%

plus federal loans or guarantees to others

4.  Category 3 plus Housing Debt                   $24.0 Trillion            155%

5.  Category 4 plus FDIC                                $31.3 Trillion             202%

Not counted are the Medicare, Social Security, Medicaid, and other liabilities which are not debts but future liabilities that are subject to change by the acts of Congress.  In an accounting sense, the management of the Federal Government (the President and his Chief Financial Officer)  may choose to book these on their financial statements or only in the footnotes to those financial statements. The audit opinion on the US Federal Government given by their outside auditors will depend on their choice in this matter.

Remember Reinhart and Rogoff and their economic analysis.   When debt exceeds 90% of GDP, growth is slowed.  Clearly on 4 of the 5 measures of debt, we exceed this slow growth cutoff.  Perhaps this, in part, explains our slow expansion since our major recession in 2008.

No way!!  Of course not!!!  We have a $1.327 trillion deficit and we only scratch the surface with a $85 billion cut of 6.4%.  Get real folks!!!  We have much much more pain to go thru to get to a balanced budget.  When are the President and Congress going to address these issues.  The Democratic controlled Senate is really out to lunch.  At least the House and the President are on the dance floor though far apart…. It will require real leadership which appears to be completely lacking.  It will take compromise and the President hasn’t come to the table yet…and the House thinks it can solve the deficit problem without new revenues.  A 35% budget gap is too great to solve with just cuts.

In George Will’s recent February 2012 column, he indicated that the sequestration cuts, though a lot of money, are minor in relationship to the hugh increases in the expenditures of the Federal Government since 2008 and minor in relationship to the deficit position we are in.  We whole heartedly agree with his view.  Our deficit for just our most recent year FY2012 ended September 30, 2012 was $1.327 trillion.  The sequestration cuts only $85 billion or 6.4% of that deficit.  As you can see in the overview and tax sections of our website, the taxes the federal government takes in have are within 2% or $55 billion of those in 2008, making up $364 billion in increased taxes.   Yet our decifit in FY 2012 is only 6% lower than  that in FY2009.  That is because expenditures have continued to increase tremendously in those 4 year.   The areas where increases were over 20% from FY2008 have been in Medicare, Medicaid, Income Security, and Other.  Sequestration will be painful but we have a whole lot more pain to suffer in order to balance the federal budget.  We can do it ourselves or have others impose their wills on us as has happened with the Greeks and others. Lets move forward and tackle the next set of issues to resolve our federal budget problem.

There has been a war of words between the Fiscal Conservatives and Moderates on one side and the Fiscal Progressives on the other about what happened from FY2008 and FY 2009 from a federal government budget perspective and what caused the hugh increase in the deficit from $459 billion  to over $1.413 trillion.  The Fiscal Progressives  indicated it was caused by a sharp falloff in receipts.  The Fiscal Conservatives and Moderates maintain it was because of a large runup in expenditures.  Both sides are partially correct but don’t have the complete answer.  If you look at the Summary page of the Overview Section of this website,  it is clear the large increase in the deficit of the federal government came from both a sharp falloff in receipts (to the tune of $419 billion or 44% of the deficit increase) and a large runup in expenditures (to the tune of $535  billion or 56% of the defecit increase).  Information does help to separate fact from fiction in the heated debates that are occurring.

However, if you look at the change from FY 2008 to FY 2012,  Fiscal Conservatives and Moderates are substantially correct.  The deficit increased from $459 billion to $1.327 trillion or $868 billion.  94% of the increase or $813 billion of the increase was from a rise in expenditures.  Only 6% or $55 billion came from a decrease in receipts.  This information is contained on the Smmary Page of the Overview Section of this website.  Again it is helpful to have data.

Welcome to our website: 

United We Stand, Divided We Fall

This is a good motto to remember.  We Americans have united during our most enduring moments and accomplished great feats.  We are faced with a daunting task with a major fiscal set of problems at the federal level during the time of the second great contraction not unlike that faced in the Great Depression.  We can solve this set of fiscal problems but only if we unite and stand together as we have done in our best moments when we accomplished great feats.  It will require that we agree that everything must be looked at.  Unfortunately, there will be pain that we must all endure.  We will pay more in taxes and have less benefits.  We will need to pay off the debts of our federal government faithfully.   By so doing, we are securing the future for our children and grandchildren and their heirs just as our forbears did for us.   It is our time and turn to sacrifice.  Let us go forward.

This website has been developed to provide objective information about our fiscal problems, to outline some of the considerations to be taken into account in each area, and to list of some of the proposals (including our own) that have been put forth to solve these issues.   Hopefully, it will provide us all a basis to make an informed judgment about our options concerning the new taxes needed and the cuts in expenditures required so we have a balanced federal budget over time.  Hopefully, it will avert a catastrophic fiscal failure not unlike that endured by Greece today or facing France, Italy, Japan, Portugal, and Spain.