Bottom Line: Why We Must Stop Deficits NOW

market-ticker.org / By Karl Denninger / 

Here’s the bottom line folks:

These are the major spending items in the US Budget, from 1980 to today.  I am ignoring all the ones that don’t matter, and I’m also intentionally leaving in one foil often used by both sides of the debate for scale purposes (Education.)

Of particular interest (and alarm) is Welfare, which doubled from 2007 to 2010.  But — it appears to have come down some in the least two years and change.  Therefore, while this is a problem, it is not the emergent one.

Those are the three categories on the top — Pensions (Social Security, mostly), Health Care and Defense.

One of them is discontinuous — Defense.  It is possible that the rough tripling from roughly 1998 to today has stopped.  If so then its impact on what is to come is not material.

Before you protest, please read the rest of this.

That leaves two categories — “Pensions” and “Health Care”.

Note the right scale graph, the purple dashed line.  This is the reason that the so-called pundits, from Bernanke on down, all argue that we must deal with this sometime in the reasonable future, but right now we’re not about to hit the wall.  That is, GDP is rising in rough conformance with those three major contributors to the government’s spending profile.  And it is GDP (in one form or another) upon which all taxes are levied.  Therefore, by first appearance, they argue, we are not about to have an imminent crack-up.

They’re wrong.


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