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It’s Only $26 Billion a day April 3, 2009

Posted by Todd in Finance, Politics.
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6 comments

I have recently become a fan of the social media application Twitter and lately I have been following Senator Tom Coburn, M.D.  from Oklahoma.  On March 31st he posted these remarks:

  • Congress has spent $136.3 billion each week it has been in session.
  • Congress has spent $26.7 billion each day it has been in session this year.
  • Little Known Fact: Page 72 of the budget admits it increases the federal debt by $4.9 trillion, rising by “$16,200 on every U.S. citizen”

For three weeks Congress has spent somewhere around $408.9 billion.  What does that look like?  Let’s look at some of the top ten companies in the Fortune 500 list – looking at annual revenues as a point of reference.

Rank Company Rev ($ millions)
1 Wal-Mart 378,799
2 Exxon Mobil 372,824
3 Chevron 210,783
4 General Motors 182,347
5 Conoco Phillips 178,558
6 General Electric 176,656
7 Ford Motor 172,468
8 Citigroup 159,229
9 Bank of America Corp. 119,190
10 AT&T 118,928

So in three weeks congress has managed to spend more than Wal-Mart’s global revenues for an entire year.  That’s more than all the products sold in all the Wal-Marts and Sam’s Clubs in 14 countries.  In three weeks congress would spend  more than twice as much as General Motors revenue (there’s a certain amount of irony in that).

The top ten Fortune 500 companies revenues are $2.07 trillion -  less than half of the increase in federal debt of $4.9 billion.

No matter how you look at it, that’s a lot of money.

I guess AT&T is just going to have to sell more iPhones.

Is There a Silent Scream About the Deficits April 1, 2009

Posted by Bob in Finance, Politics.
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1 comment so far

I enjoy a good debate as much as anyone does.  Three other guys who know nothing on this blog and, ah, yes dear – you too, might say that I’m in the fourth quartile when it comes to being argumentative.  Nevertheless, during the last eight years, a number of liberal friends and co-workers were quick to point out how President Bush “created” a huge deficit after inheriting a balanced budged from President Clinton.  Being a good conservative, I for the most part took the verbal barrages and listened to how western civilization would collapse if Mr. Bush and the Republicans didn’t eliminate the deficit. 

Well it didn’t take long but things have certainly changed.  Does anyone hear the silent scream from the left – the wailing and gnashing of teeth from Democrats and liberals given the deficits that President Obama and the democratically controlled House and Senate are racking up?  A quick look at the chart in the previous post and you’ll see that the deficit:

·         Peaked at ~$410B in 2004 following the 9/11 attack and the subsequent war in Iraq. 

·         Was reduced to around $200B in 2007 (and had been going down for three straight years).

·         Grew to ~485B in 2008 as the economy went south. 

Where is the outrage amongst my liberal protagonists (that would include you, Roland) that President Obama’s first year deficit will be ~$1.85T, which is about 3.8x higher than when Mr. Bush left office? 

By President Obama’s own calculations, around $10T of additional debt will be saddled onto America’s back by 2019.  Again, where is the outrage from the left?

In one of the presidential debates, candidate Obama excoriated John McCain and the Republican Party about the deficits.  Shortly thereafter I heard the question asked – what opposition did Mr. Obama provide to the uber-spending policies of Nancy Pelosi and Harry Reid in 2007 and 2008?  As far as I know – absolutely nothing. 

What changed?  Why is President Obama so willingly tripling and potentially quadrupling the federal deficit?  Why are liberals who portended themselves as deficit hawks now utterly silent on current and projected deficits?  Well, that’s not entirely correct as Sen. Kent Conrad (D, ND) proposed reducing President Obama’s budget from $3.6T to $3.5T.  Big deal – but what’s $100B amongst friends?  Geez, I never thought I’d think that $100B was “small potatoes”. 

A Picture Is Worth A Thousand Words (or trillions of dollars) March 27, 2009

Posted by Bob in Finance, Politics.
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2 comments

I was recently “taken to task” in the comments of a previous post by Roland for (his word) bleating out conservative propaganda related to deficit spending.  Fair enough.  I am fiscally conservative and am admittedly dismayed at the levels of proposed government spending by President Obama and the Democrat controlled congress.  Nevertheless, liberals won the election and as such get to set policy and spending levels.  That said, I came across a chart that compares actual deficits by the Bush administation over the last eight years versus proposed deficits by the Obama administration.  The chart also compares White House and Congressional Budget Office deficit forecasts through 2019.  As they say, a picture is worth a thousand words (or trillions of dollars)

 http://blog.heritage.org/2009/03/24/bush-deficit-vs-obama-deficit-in-pictures/

 

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Borrowing Analogy for the Economic Stimulus Package February 8, 2009

Posted by Bob in Finance, Politics.
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11 comments

I had the chance to watch a couple of the Sunday morning news programs and it was fascinating to listen to the various arguments and points between those for and those against the economic stimulus package presently before congress. In principle, I’m probably more against the plan. However, I am sympathetic to those who say doing nothing is not an answer.

 I understand that the government can acquire revenue four ways:

  • Levy taxes
  • Sell bonds
  • Print new money
  • Reduce current expenditures and use the cost savings elsewhere

Nowhere do I see any meaningful discussion for the government to eliminate any expenditure. There may be some tax increases for certain individuals but that’s a small percentage of the total cost of the stimulus package. There’s no talk of printing the money. Therefore, that only leaves the selling of treasury bonds (and similar things) by the government to generate the revenue for the stimulus package.

That said, a fundamental question for me is; does it make sense to borrow the money? A commenter on my Economic Stimulus Package Analogy post said, “If everybody in a country decides to cut down on spending, then we have a recession or a depression in our hands. This is called the Paradox of Thrift.” Perhaps so – but the larger question for me is can the United States continue to afford buying on credit? At some point, there has to be a decision that it is no longer economically viable to continue borrowing because of the interest on the debt.

For an analogy, let’s consider an independent roofing contractor:

  • Let’s say he charges $4,000 to replace a roof ($3,000 for materials and $1,000 for labor) and that it takes him five days to do the work. For simplicity, we’ll say he never takes a day off so over the course of a year, he’ll replace 73 roofs (365/5) and generate a total income of $73,000/yr.
  • He can’t change the cost of materials, but with new tools and a special truck with a lift, he can cut the labor time to 4 days/roof.
  • He buys the truck and tools at a cost of $54,000.
  • He now can replace 91 (365/4) roofs per year and generates an annual income of $91,000/yr.
  • The increased productivity generates $18,000 ($91,000-$73,000) more income per year. This allows the roofer to pay back the loan in three years ($54,000/$18,000).

Maybe this kind of borrowing makes sense. However, if the truck and tools wear out before they’re paid-off the roofer is back to the old income with increased debt. Not good! Will there be an increase in this country’s productivity from this stimulus package to pay off that debt? If not, then what is the point of having the stimulus package?

How much is a trillion dollars? February 6, 2009

Posted by Bob in Finance, Politics.
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2 comments

With the economic stimulus package estimated to cost around one trillion dollars, there have been numerous (and some humorous) ways to put that number in perspective. Here’s one that I particularly liked.

First – the math:

  • 1 (one)
  • 10 (ten)
  • 100 (one hundred)
  • 1,000 (one thousand)
  • 10,000 (ten thousand)
  • 100,000 (hundred thousand)
  • 1,000,000 (one million)
  • 10,000,000 (ten million)
  • 100,000,000 (hundred million)
  • 1,000,000,000 (one billion)
  • 10,000,000,000 (ten billion)
  • 100,000,000,000 (hundred billion)
  • 1,000,000,000,000 (one trillion)

Now the analogy:

  • If someone spent one million dollars per day each and every day since Jesus was born, it would take another 731 years (beyond today) before one trillion dollars was spent.
  • $1,000,000,000,000 / $1,000,000 per day = one million days
  • one million days / 365 = 2740 years
  • 2740 – 2009 = 731 (years remaining)