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| Obama's Budget is a Bust: Western New Yorkers Saddled with Unprecedented Debt |
By: Christopher J. Wilmot
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Posted: Saturday, February 6, 2010 5:07 pm
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Sunday, February 7, 2010 Rochester, NY - The non-partisan Congressional Budget Office (CBO) reported in the Wednesday, January 27, 2010 edition of the Wall Street Journal that "an aggregate deficit of about $6 trillion in the next decade, a level many economists worry could lead to currency shock, inflation, crippling interest rates or other maladies", is likely. And that's the understated 'good' news from the CBO. All this in a country that was once the largest creditor nation on the planet.
Nowadays, and for several decades in the recent past, the U.S. is the largest debtor nation, far and away. In fact, frightening federal fiscal trends are emerging that could spell financial doom for virtually all Americans.
Recent U.S. Treasury auctions have been less well attended as of late, especially by the usually eager Chinese. That means it's becoming more difficult for our federal government to sell Treasury Notes, which in turn hampers the White House and Congress from fueling massive deficit spending with what can only be called "funny money" (a.k.a. poorly backed debt that may not be worth the paper it's printed on).
According to the Wall Street Journal, "in its annual report, ...the CBO pegged the 2010 U.S. budget deficit at $1.35 trillion, a slight decrease from the $1.4 trillion 2009 deficit that set a post-World War II record...The CBO estimate is almost certainly an understatement of the deficit problem. For example, the CBO is assuming that annual spending will rise with inflation, but Congress in recent years--even before the recent recession, has been boosting spending at higher rates."
The Steuerle-Roeper Fiscal Democracy Index
Writer Gene Steuerle is the author of the on-line column, "The Government We Deserve", and is currently a Richard B. Fisher Fellow at the Urban Institute in Washington, D.C. In an op-ed piece he wrote that was published in the 1/27/2010 edition of the USA Today, Steuerle writes, "For the first time in U.S. history, in 2009, every single dollar of [tax] revenue was committed before Congress voted on any spending program. Meanwhile, most of the [federal] government's basic functions--from Justice to Education to turning on the lights in the Capitol--are paid for out of swelling, unsustainable deficits."
Steuerle continues: "Blame the recession for some of this dip. But even a recovery only temporarily restores a bit of financial freedom, not enough to reverse the downward trend. No more annual appropriations are needed to fuel this vicious cycle. On our current path, 'Rip Van Congress' could take a 50-year snooze, and the entire [federal] budget (and then some!) would be spoken for. Tax revenues would rise with economic growth, but not as fast as spending and deficits."
As referred to in the title of this section, "The Steuerle-Roeper Fiscal Democracy Index" is a measure of the percentage of federal government revenue not already allocated for 'mandatory' programs, which includes interest payments. For example, by this measure, only 35% of federal tax revenue was already allocated in the budget year 1962. That means, obviously, that a full 65% of federal outlays in 1962 were of a discretionary nature. Today, the situation is quite a bit different.
In the current federal budget year in which we are operating, allocated federal revenue exceeds 100% ! In fact, the average projected federal [previously] allocated tax revenues will range between 90% - 106.5% leading up to the year 2019.
Mr. Gene Steuerle claims: "...President Obama didn't create this predicament--whatever the ultimate deficit impacts of stimulus spending and health reform, his two major initiatives to date. But he doesn't have the option of behaving like his predecessors. George W. Bush accommodated the disease by paying for neither low taxes or new permanent drug benefits. President Bill Clinton and the Congresses of his time tackled some deficits, but eventually kicked the can of ever-growing health and retirement benefits down the road. By the time Obama took office, we had basically taken democracy--the right to have lawmakers represent our real interests--out of the hands of newly elected officials."
Peak Oil *
To compound our nation's, our culture's, financial and fiscal crisis, is the ugly and scary issue of Peak Oil. No matter what anyone, any environmental group, any renewable energy company, or Exxon-Mobil claims, we are staring at the end of oil production in the next several decades. According to many scientists and oil experts, planet earth is now past its peak oil reserves, both known and unknown. There are 800 million internal combustion engine vehicles on earth. Those vehicles require billions and billions of barrels of oil to power, yet we are slowly but surely running out of oil.
Saudi Arabia has 25% of all known oil reserves, yet now the Saudis are beginning to commence deep water drilling, and are thus drawing fewer barrels of oil from their known reserves below their soil, which is the largest oil field ever discovered.
Iraq has about 90 billion barrels of oil within its territory. Yet the world consumes 85 million barrels of oil a day, which means it only takes humans eleven-and-a-half days to consume one billion barrels of oil. That means that in just over three years, at current oil consumption rates, all of Iraq's oil will be gone, forever.
So despite the large reserves of oil in just those two countries, at the rate we humans are consuming crude, it will not be long before the cost of a barrel of oil will skyrocket once again, and eventually well past its former record of $147 a barrel, set only a short time ago.
And, even if the Alaskan and North Pole oil fields are tapped--and there about 600 billion barrels of oil as some experts predict--there is only enough oil in these frigid regions to supply just the United States with oil for six months to two years ! And currently, the U.S. does not have adequate pipe lines to exploit the region; there are no shipping routes that would allow oil tankers to traverse such a dangerous, harsh, and frozen environment; and, extracting deep water oil reserves under the North Pole ice sheet (diminishing as it is), is quite the endeavor, since the water underneath the North Pole ice sheet is 10,000-15,000 feet deep, which means we'd be using too many btu's (British Thermal Units) "in", to extract too few btu's "out" of the region. All in all, deep water drilling, especially at that depth, is a financial loser.
(* Peak Oil data source is from Mr. Michael Ruppert, former Los Angeles Police officer, and the son of a CIA operative; from a March, 2009 documentary interview).
However, according to scientist Alden Meyer of the Union of Concerned Scientists, humans will never pump the last drop of oil from the earth's crust. Why? Because at some point the mere extraction of any oil will become so prohibitively expensive that the practice will cease. And what then? While major research and development of renewable energy sources and technologies is underway, worldwide, oil is presently used in nearly all industrial and manufacturing processes. For instance, it takes seven gallons of oil to make one vehicular tire, for a car, let's say. Virtually all fertilizer is oil based, as is plastic; and on, and on.
Also, what does the end of oil mean for commercial airline travel. Nothing has been invented that will lift a 900,000 pound Boeing 747-400, or a 1.3 million pound Airbus 380 off the ground, and sustain its flight, other than jet fuel, which is petroleum based.
Summation: Both Heavy Reliance on Oil, and Massive and Unrelenting Deficit Spending are the Ruin of Our Economy
Rochester, and Western New York, with the exception of the last 30-40 years, have enjoyed nearly unparalleled worldwide economic success, for most of our history, since European contact. But like the rest of the nation, and acutely so in places like Buffalo, and urban Rochester, the local, state, and national fiscal forecast is cloudy, with a 99% chance of inclement economic weather.
Extremely difficult, ugly choices face all of us; all Americans in the near future. But, despite setbacks and evidence to the contrary, we still live in a democracy. Here's what I advise:
1.) Average citizens of average means have no business criticizing runaway government spending, if their own fiscal house is not in order. Corrective measures? Cut up all your credit cards, diversify your investments (if you have any), and start socking money away in, say, Canadian bank accounts (Canada has a better managed banking system, but don't forget to declare interest income !); buy precious metals and minerals; timber; and surprisingly, oil stocks and mutual funds (oil may be going away, but profits are there to be had in the meantime).
2.) In terms of further diversification, consider purchasing equity positions in food conglomerates, like Cargill, Archer Daniels Midland, and Monsanto (Monsanto being the least ethical of the three cited; SEE "The World According to Monsanto"). No matter the state of any economy domestically, or around the world, everyone always needs food.
3.) Track voting records of your representatives, especially at the state and federal level. Check out the Congressional Record, and a multitude of other publications that will assist you in tracking and compilating how your rep's vote on all kinds of issues. Even the D&C has a history of occasionally publishing how local rep's vote (Louise; Jim Alesi; etc.). See which elected officials are really 'deficit hawks', and which ones only pretend to be.
Lastly, seek out alternative media sources to provide you with a broader and more honest range of news coverage. If you want to know which house burned down last night in the City of Rochester, or who was shot overnight ("If it bleeds, it Leads!"), then by all means, tune into channels 8, 9, 10, 13, and 31 (Talk radio-based stations are no better). But if you want intelligent and cogent analysis and straight reporting of vital news that truly effects your life, try the following: BBC World (satellite radio); NPR (National Public Radio on 1370 AM, WXXI); the Economist Magazine; PBS (Channel 21, Time-Warner Cable channel 11); The New York Times (still the national newspaper of record); the Washington Post; and the Wall Street Journal.
Additional good sources of alternative news can be found in publications like Harpers Magazine; New York Magazine; and the Village Voice.
Democracy and financial stability ain't free: Despite what our Founding Fathers said, more and more, they're a privilege, not a right.
Christopher J. Wilmot served as a Legislator in the Monroe County Legislature from 1996-2005. He is currently a film maker, and the owner of several small businesses headquartered in Downtown Rochester.
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