Thursday, October 22, 2009

Obama's Stash--Part Three or How Many Zeros in a Trillion

Obama's Stash--Part Three or How Many Zeros in a Trillion?

When Gray Davis was still governor of California--before the recall effort and the election of the Governator--he gave an interview to the media to explain why the state was in deficit. At the time, I had taken over the management of a company struggling with profitability. Reporting to my board was a chore. And then I heard the melodious voice of Gray Davis explaining away the state's problems. It's not that we spent too much money, it's that we didn't have enough revenue.

Would my board fall for that? Unlikely.

Yet this view is de rigeur for government officials. John Garamendi, current Lt. Governor of California recently made a similar statement. Those pesky revenues are the problem, you see. (For those of you in District 10 he is running for United States Congress--and oh by the way, doesn't even live in the district, but that is for another time.) Even after the unprecedented tax increases passed earlier this year, some $38 billion for Californians, Garamendi isn't done. He wants to go after Prop. 13 and raise our property taxes. California, the great sink hole, needs more revenue.

Their revenue is our income, our savings, our property, our sweat.

Here's the part the politicians refuse to understand. When you tax something, you get less of it.
Take the recent hike in California sales taxes. In my county we pay 9.25%; in LA it is closer to 10%. I now make a conscious effort to purchase any and every thing subject to sales tax via the internet or do without. 10% is confiscatory in my view. And it seems I am not alone. Despite the increase, sales tax revenues have been below levels projected at the time of increase (link to story below). Higher taxes will dampen demand; the polar opposite consequence the Democrat legislature intended. And guys like Garamendi simply will not get it. They are not done ferreting out revenue and will never be done as long as we give them the keys to the hen house.

This tax and spend and spend and spend strategy has worked so well in California we are now pursuing it at breakneck pace on the national level.

Consider for a moment the $789 billion stimulus bill that we simply had to pass this last February. A sort of inauguration gift to the Fiddler-in-Chief. He told us it was the only way to ensure unemployment didn't rise above 8%. We are hovering at 10% eight months later and his chief economic advisor yesterday told us to get used to it.
  • The deficit stands at $1.42 trillion.

  • The Obama Administration projects "the deficits will total $9.1 trillion over the next decade unless corrective action is taken."

  • "Corrective action" is apparently ramming through a health care bill that the majority does not want to the tune of another $1 trillion. That ought to do the trick.

  • The deficit as a percent of GDP is now at 10%--the highest level since WWII.

  • Revenues collected in 2009 were down 16.6% from 2008 yet spending rose 18.2%. Most of us who run our households (or a small business if there are any left) understand that kind of math just doesn't work.

These statistics were quoted from an article posted on MSNBC (link below), hardly a critic of the Obama Administration.

So, I am hopeful that Obama's stash is a big one and that it can accommodate the plethora of deficit zeros he is accumulating. $1,000,000,000,000 is a lot of dough.

"The trouble with socialism is that you eventually run out of other people's money." Lady Margaret Thatcher, Former Prime Minister of England

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