Economy

The Scope of the Problem

According to figures from the Congressional Budget Office (CBO), the US government spent a total of $6.8 trillion in 2021. Of that amount, $4.8 trillion was mandatory spending, otherwise known as entitlements. In other words, money that has to be paid out by law: Social Security, Medicare, Medicaid, Unemployment Compensation, Refundable Tax Credits, Paycheck Protection Program (PPP), and other mandatory spending. Another $350 billion was interest on the debt that we already owe, bringing the total outlay for mandatory spending to $5.2 trillion. The government only collected $4 trillion in taxes. So without spending a dime on the rest of the things that the government must do: defense, courts, prisons, and all of the alphabet agencies, the government is already running a deficit of $1.2 trillion. Add in all of those expenditures, and the deficit rises to $2.8 trillion. Compare that to my post on this topic from a decade earlier.

What is most alarming is the deficit as a percentage of our GDP, which right now is 12.4%. Over the past 50 years, the deficit has averaged 3.5% of GDP. Think about how much spending has risen to expand the deficit to this point. The national debt is now 100% of our gross domestic product. A decade ago, it was 34% of GDP. Three years ago, it was 80% of GDP. That’s without accounting for the money we owe the Social Security trust fund. Add in that amount, and the debt to GDP ratio rises to 128%.

The US isn’t even in the worst shape. Take a look at the debt to GDP ratios of the world’s top 10 debtor nations:

  1. Venezuela — 350%
  2. Japan — 266%
  3. Sudan — 259%
  4. Greece — 206%
  5. Lebanon — 172%
  6. Italy — 156%
  7. Libya — 155%
  8. Portugal — 134%
  9. Singapore — 131%
  10. Bahrain & the United States (tie) — 128%

In contrast, here are the ten countries with the lowest debt to GDP ratios.

  1. Brunei — 3.2%
  2. Afghanistan — 7.8%
  3. Kuwait — 11.5%
  4. Democratic Republic of the Congo — 15.2%
  5. Eswatini — 15.5%
  6. Burundi — 15.9%
  7. Palestine — 16.4%
  8. Russia — 17.8%
  9. Botswana — 18.2%
  10. Estonia — 18.2%

Note that Russia is the only large, first world country in the bottom ten. The suspicious side of me wonders if that is why the Democrats are so keen on starting a war with Russia.

What we are seeing here is that the entire world is on the verge of an economic collapse caused by profligate spending and loose fiscal policy.

By Divemedic, ago

Gas tax

During October, gas prices in Florida were 25 cents lower, thanks to a “tax holiday” signed by Governor DeSantis. That tax expires this morning. I’m sure the headlines from the MSM will be how it is DeSantis’ fault that Florida gas prices just went up by 25 cents a gallon.

Meanwhile, Joe Biden is slamming oil companies for making “record profits” while “price gouging” the American public.

Exxon Chevron made a combined profit of $29 billion for the second quarter for all sales of everything they sell, worldwide. During that same quarter, Americans used about 35 billion gallons of gasoline, meaning that the Federal government collected $7 billion in profits from the sales of gasoline. Then there are the taxes on other Exxon products: oil, natural gas, diesel, propane, and more. Who is making the record profits here?

Ronald Reagan summed it up nicely: Tax and spend.

Meanwhile, the US has less than a three week supply of diesel fuel, which is less than half of the normal amount. That doesn’t mean we won’t have any diesel in three weeks. What it means is that supply is short. That means that the law of supply and demand dictates a rise in diesel prices. Farmers rely on tractors, and our supply lines rely on trains and trucking, all of which depend on diesel. This will mean that the prices on everything will soon begin to climb. Right now, diesel stands at $5.25 a gallon in my area. Let’s see how that goes.

By Divemedic, ago

Buy Backs

Not those buybacks. Nope, after selling all of our oil reserves to the Chinese, the US is now planning to buy back 60 million barrels of oil at a future date.

The call for bids on the initial 60 million barrels “will take place in the fall of 2022 to secure delivery in future years when prices are anticipated to be significantly lower than they are today,” according to the press release.

I wonder if the press will investigate just who is making money on this deal. We already know that Hunter Biden is an investor in the company that is buying US oil, and I am wondering if he is an investor in the company that will be selling it back. I would also be interested to know if the deal is still “ten percent for the big guy.”

Can you imagine what the press would have done if Trump had been involved in a deal like this?

By Divemedic, ago

Social Security Means Tested

A new idea is being floated for Social Security. Read on:

Workers today are on the hook for Social Security taxes with the promise that they’ll be entitled to benefits down the line. Now, imagine someone who’s a higher earner pays those taxes for 45 years, only to then be told, come retirement, that they’re not getting benefits, or their benefits are getting reduced, because they also happened to save really well and have a large amount of nest egg-produced income.

So you will pay the tax and save like you are supposed to. Because your retirement savings are paying interest, you get nothing. Meanwhile, some low life 30 year old drug addict claims that he hurt his back and collects disability for the rest of his life after getting his student loan forgiven.

How is that for fairness?

By Divemedic, ago

No Mean Tweets

People are complaining as housing costs rise. This teacher can’t afford to buy a home that she wants, but also complains that rent is too expensive, as rent costs nationwide are above $2,000 for the first time ever. But, hey, she doesn’t have to read mean Tweets, so she has that going for her.

“Rents are going up just as fast as home prices are,” says Fairweather. Yes, that is how economics works. People buy houses, then rent them out. If the cost to buy goes up, then so does rent. The same thing happens in restaurants, when the cost of food goes up, the prices at the restaurant go up. It isn’t rocket science. Take a look:

Beginning in February/March of 2021, rents began to skyrocket. Renting a home costs 15% more than it did a year ago. If only we could pinpoint an event that happened in January of 2021 that could be responsible for this rapid increase in housing costs.

Reading her Linked in page, she lists the following as her causes:

Children • Education • Human Rights • Politics • Poverty Alleviation • Social Services

Given that, I am guessing that she voted for Biden. Fuck her. She is getting EXACTLY what she voted for. Boo fucking hoo.

By Divemedic, ago

Inflation

It’s been a month since we last looked at inflation here at Sector 8.

The government has been creating too many dollars. In December of 2020, one third of all dollars that had ever existed had been printed in the past ten months.

It appears as though the Federal government was just getting started. Six months later in May 2021, it was said that 40% of every dollar that has ever existed was created in the preceding 12 months.

Another 5 months later, that had increased to 80 percent of all dollars that have ever existed were printed in the past 22 months.

This is a cycle that causes hyperinflation: Printing more money causes that money to become less valuable. To counter this, more money is printed, which causes it to become less valuable. Wash. Rinse. Repeat.

In fact, the Fed printed an average of $27 billion per day in 2020 and put those dollars into circulation.

In 2021, the Fed increased that rate to nearly double that. Of course, most money today isn’t physically printed. It exists only in the electronic minds of computer systems. That’s because no one could physically print that many bank notes.

This out of control creation of money is warping the entire economy. Excluding food and energy, consumer expenses are up 4.9 percent from a year ago. This is the largest increase in 40 years.

According to a friend of mine who works in the banking industry, the Fed governors were recently polled on where they see the Federal funds rate going in the next 24 months. The average was 2 percent.

A two percent increase is a big deal. It also isn’t enough. The greatest impact that higher interest rates will have is on the largest borrower in the world — the United States government. The United States national debt is nearly 30 trillion dollars, which it finances through Treasury bills, notes and bonds. The public holds 80 percent of this debt, which requires direct interest payments, rather than ledger transfers on the Treasury books.

The fiscal year 2021 United States budget included over $562 billion spent paying interest on the federal debt. To put this into perspective, the cumulative net worth of the five wealthiest people in the US (Jeff Bezos, Elon Musk, Bill Gates, Mark Zuckerberg and Warren Buffet) was $465 billion. So, the interest paid on the debt in 2021 is more than these five people’s net worth COMBINED.

An increase in those interest rates will cost the government a lot of money. Money that they do not have. Any increase in interest rates will add hundreds of billions of dollars of interest to the federal budget. In fact, a one percent increase in interest rates means an extra $300 billion in interest on our national debt.

The only way for the government to pay the higher interest is- you guessed it- to print the money, which will cause the currency to be devalued, and worsen inflation, which will again cause higher interest rates. Wash. Rinse. Repeat.

We are riding this sinking ship all the way to the bottom.

By Divemedic, ago

The Useless Generation

Just last week, I asked how people could afford to simply up and quit their jobs as a part of the great resignation. It seems as though the child tax credit was a big part of it, and now that credit has come to an end.

Yahoo brings to us a piece that explains how those who have quit their jobs are now complaining that the loss of the tax cut means that they have no money for bills, believing that the government should pay them to sit at home and do nothing but breed.

Roberts, who lives in Marks, Miss., left her job as an insurance agent at the beginning of the coronavirus pandemic when her employer wouldn’t let her work from home…”This tax credit is the only way we’ve kept food on the table,” said Roberts, who is raising a 5- and 7-year-old. “For a lot of the working poor, it gave us a chance to finally take a freaking breath and not stress so much about how the bills get paid every month.”

Imagine how easy it would be to pay your bills if you didn’t quit your job.

Back in Mississippi, Roberts – who took custody of her cousin’s grandchildren five years ago – says she’ll probably let her car insurance payments lapse so she can buy groceries. She has just $388 left in her bank account but feels lucky to own her house, which she says puts her in a much better position than many friends who are at risk of eviction or foreclosure.

This poor woman is stuck having to raise and provide for the grandkids of her cousin. I feel bad for her, but it isn’t the responsibility of the US taxpayer to give her money, simply because she has a sad backstory.

Who else is sad because they aren’t getting checks anymore?

In San Antonio, Nathaniel Miller and his wife used their monthly payments to buy gluten-free food, oat milk and diapers for their 1-year-old daughter, who has severe food allergies. Without it, he says his family of four will have to start using their savings to cover everyday expenses.

“We’re a one-income household, so that money has been a lifeline,” said Miller, 34, who works in communications. “Now that it’s gone, I don’t know where that extra money is going to come from. We have a little bit in savings, but savings deplete quickly. If anything else comes up, we’re kind of screwed.”

My wife and I both have jobs. Why doesn’t yours?

Caroline Nasella, a government attorney in Sacramento with 3- and 6-year-old daughters, said the extra $400 a month helped cover child-care costs and provided extra breathing room during the pandemic.

Or how about this woman:

Kelly McKernan, an artist and illustrator in Nashville, used her $250 monthly checks to cover mid-month bills and buy school clothes and winter boots for her second-grader. Her income has been cut in nearly half, to about $25,000, during the pandemic.

“Not having that money is already having a really big impact,” said McKernan, 35, who’s working on a graphic novel anthology with the rock band Evanescence and is looking for art teaching positions to make ends meet.

It’s good to know that my paycheck is cut in half by taxes so my tax money can be used by a woman to sit at home and work part time on a comic book about a rock band.

By Divemedic, ago