It's been a week since the government shutdown was averted with an hour to spare. The pundits on both sides have declared winners and losers. When it comes down to it, the only winners were the DC beltway politicians and numbers junkies. The American populace was the definite loser in the end. As some politicians are wont to say, the arch of history was not changed. Let’s try to understand the numbers involved. Shortly after the November 2010 election, the Republicans wanted to cut $100 Billion from the 2011 spending allocations. Stepping back for a second, the reason for the use of the term “spending allocations” is because the Democrat led House, Senate, and White House did not pass a budget for the first time in 36 years. So the government was running on continuing resolutions, which basically allocated monies based on 2010 levels with a slight increase for the first 5 months of the 2011 fiscal year. Are you ready for a ride on the numerical rollercoaster? Since there was technically only 7 months left in the 2011 fiscal year, the Republicans changed their stance to a prorated $61 Billion while the Democrats were still at $0. Then the continuing resolutions started with the demand of $2 Billion cuts per week extended culminating in the final resolution of $38 Billion worth of cuts for the remaining months in fiscal year 2011.
Let's take a moment to understand our government’s current situation as we leave the station. The government currently brings in about $2 Trillion [per year] to the US Treasury, while the projected spending for 2011 is around $3.7 Trillion. Therefore, our government is on track for $1.7 Trillion of deficit spending. Have trouble with trillions? Those numbers equate to $5.5 Billion of revenue per day compared to $10.1 Billion of spending per day.
That means our government is spending $4.6 Billion per day more than it brings in. If the number of 40 cents on the dollar are currently being borrowed are correct, then we are borrowing $1.8 Billion every day to run our government.
If you ran your business like this, wouldn’t a shutdown, at least to stop the hemorrhaging, be an absolute must? What would the public value of a corporation be, one that continues to operate in this reckless manner?
Hang on tight as we enjoy the numbers being spun from all the twists and turns of the rollercoaster ride. There was $40 Billion incremental spending from the 2010 budget that President wanted but was not included. So the Republicans were saying that $61 Billion plus the $40 Billion equated to the $100 Billion that they were originally after. Meanwhile, the Democrats have said they have compromised with $78 Billion which is the $38 Billion + $40 Billion of requested incremental spending. Then you have the scenario where the $38 Billion that was agreed to in the final hour, actually included the deductions from the previous CR’s bringing last week’s resolution to $26 Billion. Then, as you start to enter the loop to loop, you hear the President caved or the Republicans caved. When you complete the loop, you’re in essence back to where you started, there have been some analysis that state the $38 Billion may only reduce the deficit by $350 Million.
As we complete our journey and head back into the station, it’s time to put these CR numbers into perspective with our current situation. The $38 Billion in cuts is only 1% of our current spending. How many of you out there are experiencing 10-20% cuts in your current companies? And if the lowly number of $350 Million is correct, that is only .01%. In other words, only 1/100th of a penny cut per dollar spent. So, with all the hysterics of the impending government shutdown, it becomes obvious as we disembark the rollercoaster, the politicians can run for cover with any numerical values they want to toss out and the American populace lost.
Links for reference:
http://pajamasmedia.com/rogerkimball/2011/04/09/pathetic/?singlepage=true
http://dailycaller.com/2011/04/10/fine-print-of-the-deal-still-under-negotiation/
http://www.nationalreview.com/articles/264599/strike-one-editors
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