The Trend Driving The Coming Trainwreck (The Calculus of Coming Government Financial Meltdown.)

“You may not be interested in war, but war is interested in you.” – Leon Trotsky

(HT: Mike Rosen, Denver Post)

The Tea Party Movement arose in large extent over the growing concern that American Government was costing more than what our nation could ultimately afford. A lot of blame was placed on ObamaCare and wastrel Congressional majorities populated by the sycophantic, rubber stamp legislators supporting Harry Reid and Nancy Pelosi. These are fair indictments, but only partially sufficient to scope America’s budgetary problems.

The particulars, ObamaCare, Pigford Scams, Stimulus, et al, are certainly bad governance run amok from partisan pleading. The worse and more encompassing truth is that these debacles should surprise no one given the trajectory of US Federal Government spending since 1960. Mike Rosen (cited above) gives us the truth; straight, with no chaser. Rosen’s data follows below.

In 1960, when John F. Kennedy was elected — after the Korean War and before Vietnam — defense spending was 52 percent of the budget and 9 percent of GDP. In the 1980s, Ronald Reagan’s defense build-up, which ultimately defeated the Soviet Union in the Cold War, averaged 26 percent of the budget and 6 percent of GDP. Today, defense spending is 19 percent of the budget and 5 percent of GDP.

(Rosen, Ob. Cit.)

Fifty years have passed from 1960 to 2010. Defense spending went from 52% of total Federal expenditures to 19%. That’s a trend of approximately (-2/3)% per year the entire time. In terms of GDP, defense spending has dropped from 9% of GDP in 1960 to 5% of GDP today. That gives us a mean annual trend of about (-2/25)% per year.

Social Spending has seen an opposite trajectory. Rosen’s data from the same article cited above follows.

…social spending (what the Office of Management and Budget categorizes as “payments for individuals”) was a mere 26 percent of the budget in 1960. By 1989, the year Reagan left office, it was 47 percent. Today, it’s 64 percent, and growing. In 1960, non-defense spending was 8 percent of GDP; today it’s 20 percent.

The annual trend here involves a growth of 38% in the proportion of the Federal Budget spent of social spending over the last fifty years. This gives us an annual trend of (+19/25)% in social spending per year. As a percentage of GDP, social spending has grown 12% over the past fifty years, which gives us a YoY average increase of (+6/25)%.

Since 1944, the US has averaged consistently in the ballpark of 18% of GDP in tax revenues. (Max, 1944 – 20.9%, Min, 1950 – 14.4%). We spent 25% of the GDP in 2010, and took in 14.8% of the GDP in revenue. Future estimates show revenues going back up in a couple of years to 18%.

Assuming these estimates are good; we do take in 18% of our GDP per annum in tax receipts on a regular basis in the out years. Even this recovery in revenue would leave our economy in a major conundrum. Five years from now, we will spend 21.2% of the GDP on Social Spending (5*6/25), 4.6% of the GDP on Defense and will take in 18% of GDP in revenue, assuming 2016 is a typical tax revenue year. This leaves us less well defended, more of a welfare state and approximately 25% over revenue in our spending plans.

Ten years hence, we spend 22.4% of GDP on social spending, 4.2% of GDP on defense and take in 18% of GDP in revenue. The shortfall now closes in on 33%. For twenty years out, the numbers read 24.8% of GDP on social spending, 3.4% of GDP on defense and 18% in tax revenue. That gives us a shortfall in revenues north of 40%.

The current trajectory of Federal spending, taken as a linear trend line from 1960 to 2010, is in no way sustainable in the future. It will lead this country to dissolute bankruptcy. It will force us to borrow or militarily steal from others to meet the demands of our appetites. This is something to keep in mind as we evaluate whether or not our new “Tea Party Caucus” is adequately reducing the size of our governmental apparatus.

The uncontrollable American appetite for social programming has become a existential threat to our existence that Hu Jintao and his booted thugs could never dream of matching in terms of dire consequences. Another nation will eventually invade our nation, conquor our armies, lay waste to our cities and enslave our future generations if we continue this stupidity. But in the final analysis, it will only be ourselves to blame if the blind stupidity continues. That, Ladies and Gentlemen, is why after Election Day is still a time to party like its 1773.