You Can't Spend Your Way Out of This

This past Tuesday, the Congressional Budget Office (CBO) released a report that says that the budget deficit will grow through 2023 and it states that it will eventually require the government to raise taxes, reduce benefits and services, or undertake some sort of combination of the two. Here is the kicker, these steps will be needed just to cover the interest payments.

You know that point when you have a mortgage or student loans, you've been making your payments, painful as they may be from month to month, then look at your end of the year statement and realize the principal isn't going down. That all the money you've put into these payments are just for the interest. The country is starting to get that way.

The CBO projects that interest rates on the Ten-Year Treasury Note will rise from 2.1 percent currently, to 5.2 percent in 2017. A mix of every bond ratings declining and the fed continuing to eat most of the free market action on bonds has helped keep this rate artificially low for some time, but the CBO is projecting that these rates will not stand over the next 5 years. Since the government usually pays no more then the interest in it's debt anyway, and is still borrowing at ridiculous levels, our payments to service the debt, a topic getting not nearly enough explanation during the fiscal cliff crisis, will go up... by a lot.

In December, the Treasury Department reported that total interest bearing debt owed by the government carried an interest rate of 2.5 percent. FY2012’s interest payments on our debt was in the neighborhood of $360 billion. If interest rates overall reflect the CBO’s forecast for the benchmark, these interest payments alone will clear the $1 Trillion mark by 2017. At which point we will be spending more on debt then on education, or welfare, or even national defense. It would also equal about the amount of money we have to borrow now to just make it though a fiscal year.

What an odd coincidence that Obama will be out of office at the end of 2016. But, like a first divorcee of a gold digger, we get stuck paying off the bill for this multi-year shopping spree. Leaving us with the choice of paying our obligations to our debt, or spending money on frivolous things like Social Security or Medicare. 

Couple this very predictable crisis with the possibility of dipping into another recession if the can-kicked sequester on defense spending proceeds and the economy doesn't see a turn around in the next, oh, lets say, three to five hours. Another recession and more spending could also push us into more bond rating trouble, which could push the 5.2 percent guesstimation of the CBO even higher, causing even higher payments, well, you can see how this can go from horrible to downright cataclysmic if everything doesn't go according to plan.

Or, the more likely route, the fed will continue to buy up bonds with this magical invisible stockpile of money they have. Shoring up Social Security and Medicare as they start to pay out more then they take in in the trillions. All the while this is used as an excuse to raise tax rates and come up with new things to pay tax on, (Internet Tax?) while never addressing the real problem, that this government (note that I'm not singling out the president) has a significant spending problem.

A Tale of 2 Kids

How many children went to Avengers, to Batman, or even Harry Potter? Many. How many parents put their children down in front of the evening news during the chaos of the Sandy Hook shooting? Not nearly as many. Do we think that our children are smart enough to know the difference of when something is real, and when something is make believe? Most of us must think that they are, they know that when people are shooting at Iron Man that it is not real, that it is fake.

The question then is why is it when a child knows something is not real, that they are smart enough to know that something poses no danger, that we as adults can not react the way that reflects that knowledge?

The first story is of a child who did a bad thing, and will pay the consequences of it. At seven years old he came across his grandfathers weapon and brought it to school, loaded. The police, rightfully so, were called and the child, who's name is being withheld from the media, was suspended from school. There was no lock down, there where no criminal charges filed. The authorities came and secured the weapon, and everyone breathed a collected sigh of relief as it appears to all be just some big misunderstanding. A good lesson to be learned from this would be about securing your weapon from a child, or anyone who would consider stealing it. The punishment for this event had to be real as the risk was very high as the weapon was loaded, making the threat, also, very real.

The new face of gun violence

The second story, is of a six year old girl bringing what is described as a 'little clear plastic gun" and was also described as having the orange tip that denotes the Airsoft brand. Once again, the authorities where called, the toy was collected, the parents were called, but what continues to happen, and the fact that there is little deviation from the first story is what is bothering me. This six year old girl is not suspended, she was expelled, and can be subject to criminal charges if she violates that suspension, from school and all school related activities. She know what she had, and simply thought it would make for a neat show and tell. Much like how a child may bring their Asgardian hammer Mjolnir toy, knowing that it could in no way summon a blow capable of crushing a mere mortal.

So this is our new reality, that all threats, be they real or perceived, be they understood for what they are or not, are not only responded to the same, which makes perfect sense, but also criminalized the same way. What values does this enact on our kids? I could understand sending the kid home for the day and maybe even confiscating the toy, but to instill the idea that even make believe has serious consequences. The idea that the actual threat doesn't come into the picture, then how am I suppose to explain why watching Superman is acceptable because it's fantasy, when kids have to live with such dire consequences of their imaginations. Now running around a corner too fast and bumping into someone is on the same level as intentionally tackling someone. I agree, tell the kid who was running too fast 'no, that is unacceptable'. But I could not label them as a bully and kick them out of school after one accident.

The only way to unravel this logic for me is to assume that the child had evil in her heart and in her mind when she brought what she knew was a toy to school. You'd have an easier time explaining to me how the parents of this kid are supposed to tell their 6 year old that what she did was wrong. "Sweetie Pie, I know it was show and tell and you thought it would be fun to show your brothers toy, but only evil people have guns, period. Which makes you and your brother evil. Mommy and Daddy are sorry that we raised you all wrong to think that playing with toy weapons is ok, cause you see, Mommy and Daddy were raised in the brutal 80's where GI Joe cartoons where ok, but only because our parents grew up in an age where the Lone Ranger was ok, because his parents were raised in a world where playing cops and robbers was ok, because their parents, your great-great-great-grandparents, thought that cowboys and Indians while going 'Bang!' with wooden rifle cut outs, was ok."

Kids don't bring guns don't belong in the schools, I get that, but there was no danger here. Usually when I make a mistake that noone got hurt, and that no one really was at risk for getting hurt, that I apologize and move on.

Why a Democrat Voted 'Nay'

Dear Chris:

Thank you for contacting me regarding legislation recently enacted by Congress to address the automatic spending cuts and tax increases known as the "Fiscal Cliff" that were scheduled to take place on January 1, 2013. I appreciate hearing from you about this important topic.

Over the last few decades, middle class families have seen their jobs become more insecure, their wages stagnate, their savings and pensions shrink, and the cost of education skyrocket. At the same time, the wealthiest among us and the largest corporations have grown ever richer.

Our economy is out of balance, and this lack of balance threatens the very fabric of our entire economy. That's because the economy is driven forward by middle class families with money in their pockets. We need to start to put our economy back in balance with an economic policy that will help to rebuild the middle class, providing good jobs now and in the long term.

Over the course of the debate on the fiscal cliff, I repeatedly stated that I would evaluate any legislation to avert our economic and fiscal challenges based upon the impact it would have on middle-class families. Unfortunately, I did not feel that the final agreement reached would help to strengthen the middle class, and as a result I voted against the measure. While I fully understand the economic impacts that would follow if the tax increases and spending cuts were allowed to take effect as scheduled, I do not believe that the legislation put forward was the appropriate or the only response to our present challenges. Specifically, I have three concerns about the legislation.

First, this legislation does not address our number one priority - creating well-paying, middle-class jobs immediately. While the economy has improved considerably since the depths of the Great Recession, millions of Americans are either unemployed or working in jobs that do not pay adequate incomes to allow them to support their families. Short-term job creation and long-term deficit reduction are both critical, and I was disappointed that the bill failed to provide the direct investments in immediate job creation measures that our country desperately needs.

Second, I am concerned that the legislation does not raise enough revenue to put our country on a path to fiscal sustainability while still allowing us to make the important investments in important areas that support a strong middle class, especially job training and education. Under the agreement, individuals and families earning less than $400,000 and $450,000 per year respectively will see their tax rates permanently extended at 2012 levels.

While I was pleased that middle class families did not experience a tax increase, extending tax rates for many wealthy individuals will reduce revenues by hundreds of billions of dollars over the next decade. By not allowing tax rates on wealthy households earning between $250,000 and $450,000 to revert back to Clinton-era levels - a time when economic growth was robust and job creation was at all-time highs - we increase the risk to important benefits for the middle class. With government spending dropping and deficits remaining high, every dollar of sacrifice that the wealthy forgo in this deal is a sacrifice that we will later be asking middle class Americans to give up in earned benefits such as Social Security and Medicare.

Finally, I am concerned that the changes made to the tax code will make our system of taxation less progressive and over time provide fewer benefits to those with modest incomes. While the legislation made permanent tax benefits for wealthy Americans, such as the income tax rates on upper income earners and the estate tax, tax measures targeted at the middle class families - especially those with children - are only extended for five years. This includes the American Opportunity Tax Credit, which provides families $2,500 annually to help pay for college. It also includes an expanded Earned Income Tax Credit, an effective tool for helping working families escape poverty, and the Child Tax Credit. The temporary extension of the tax benefits for middle class Americans will make it much more difficult to renew them in the future.

Sometime in February, Congress will likely consider legislation to reduce the deficit, raise the debt ceiling, and avoid automatic across the board spending cuts called sequestration. Throughout that process, I will continue to advocate for a balanced approach that will raise revenue from those who can afford to contribute and decrease spending in ways that minimize the adverse impact on the middle class and those of more modest incomes.

As I continue my work here in the Senate, I will continue to place the highest priority on rebuilding the middle class and promoting economic security among working families. Thank you for writing to me.

Sincerely,

Tom Harkin
United States Senator