Friday, March 01, 2013

Can You Spell Hyperbole?

The hyperventilation about the spending cuts is really getting out of hand. You should hear the wailing in San Diego, which has shipyards and lots of other defense contractors in addition to the world’s largest US Navy base. Now we’ll never get a new stadium for the Chargers. Hell, we may not even be able to operate the old one.

There’s a guy over at Mish’s Global Economics who, as you might expect from the title, has a little larger viewpoint that the American one of “how does this affect my own personal job?”

He points out that in 2006 government spending was $2.6 trillion. In 2008 it had gone up to $2.9 trillion, an increase of "only" 12.2% in two years. He points out that this is not caused by inflation, because the Fed is bragging about how they have successfully held inflation to 2% for the past several decades. That’s pretty hilarious in itself, but is a separate subject.

Then the financial crisis hit and we had a “one-time” boost in spending that raised government spending to $3.5 trillion, an 18% increase over 2008, but no less than 36% over just three years earlier in 2006. The stock market loved it, of course, but it really hasn’t done much for the middle class in terms of wages or number of jobs.

He then points out that government spending has then stayed at $3.5 trillion or more ever since. The “one-time stimulus” continued into 2010, 2011, 2012, and now into 2013. Nobody actually voted for a budget to spend that much, it just continued that way because nobody voted to stop it. It has continued because of a series of “continuing resolutions” passed by a Republican House and a Democratic Senate, and signed into execution by a Democratic President.

How many times did I name the Democratic Party there? Right.

So now we hit a point where we are having to cut $85 billion of that spending, and all hell is breaking loose. We are, all sides are claiming, destroying the economy with this $85 billion cut in spending. That $85 billion represents 2.5% of total government spending, and 6.5% of the increase since 2008.

Think about it; 2.5% leads us to financial Armageddon. Madness.

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