January 8, 2010
Money better buy you votes,,,,
"No generation has a right to contract debts greater than can be paid off during the course of its own existence" - George Washington to James Madison 1789.
Texas Governor Rick Perry said Thursday in Houston that” federal spending is out of control and unless it's reined in, it will ruin the country.” This is why I like Economics. Very few people understand it. Ricky is one of ‘em.
What was Simple Rick’s idea to make it happen? Just propose an amendment to the U.S. Constitution to require Congress to balance the federal budget. He knows he'll never get 2/3 of the House and Senate, then 3/4 of the states to go along with it. This leads me to believe that Gov. Perry has NO IDEA about the Federal Budget. As a favor to Rick, I’m going to start with some basics: How the Fed Gov. gets the money, the history of Federal Budget and National Debt, where the Federal Government spends the money,
Budget deficits occur when we take in less money than we spend -- that is, when budget receipts are exceeded by outlays. Receipts come mostly from Income and Social Security taxes, paid by people like you.
In 1835, under President Andrew Jackson, the US Federal Budget was balanced and the National Debt was paid in full. This has never happened since. I miss Andrew Jackson. AND…I’ll repeat: National Debt paid in full and Federal Budget balanced…the president was Andrew Jackson. Sure, there have been some Federal Budget surpluses off and on, but the whole package? 1835.
During the 1970s and 1980s, the US Federal Budget ran deficits for twenty straight years.
Finally in the 1990s, another economic boom enabled four years of budget surpluses. These surpluses temporarily slowed the growth of the National Debt.
The National Debt is growing and the US Federal Budget has now dropped dramatically back into deficit. How is the Federal Money distributed? This is the 2010 budget:
The Centers for Medicare and Medicaid Services receive over 20%. This money supports Federal Hospital Insurance (FHI), Federal Supplementary Medical Insurance (FSMI), and Medicaid. Beginning to see why there is a HEALTHCARE focus??
The Social Security Administration receives about 15%. This money supports Federal Disability Insurance (FDI) and Federal Old Age and Survivors' Insurance (FOASI). Remember: As Baby Boomers are aging, there is a growing demand for Social Security, Medicare, and Medicaid Services…with less taxpayers (younger workers) supplying the fund.
The Defense Department receives about 15%. This includes some civilian programs, such as military retirement. It does not include the Veterans Administration, a separate department.
Interest payments require about 10% of the Federal Budget. Interest is paid on our National Debt, incurred by budget deficits in previous years.
The State Department receives less than 1% of the Federal Budget. There are some foreign aid expenses in other departments, but their total is still a small portion of the budget.
The EPA receives less than 1% of the Federal Budget. About half of this money goes toward state assistance grants.
SOURCE: Federal budget data are obtained from the Public Budget Database of the White House Office of Management and Budget. Deficit, surplus, and debt figures are obtained from OMB's Historical Tables.
Federal Office of Management and Budget: http://www.whitehouse.gov/OMB/
Stay with me:Budget deficits occur when we take in less money than we spend -- that is, when budget receipts are exceeded by outlays. If we have to SPEND more money on wars, Medicare/Medicaid and Social Security, then we have to take IN more money with taxes or cutting budgets! It’s very easy. It’s your checkbook magnified times many billions.
But the day before Gov. Perry made his profound statement about simply making it law to have a balanced budget he made an appearance in Lubbock where he proposed to make it difficult for Legislature to raise taxes and limit the amount state spending could grow. Perry is proud that HE kept a balanced budget in Texas. He forgot….the balanced budget in Texas is the law, controlled by the State Comptroller, and backed up by a “rainy day” fund.
The TEXAS budget process: http://texasimpact.org/node/373
The Texas Constitution requires that the Legislature budget for no more than the amount of revenue that the Comptroller certifies will be available. The requirement that Texas must balance its budgets is a major difference between state and federal budgeting, for Texas cannot run a deficit, while the national government clearly can. The fact that Texas must only spend what is available presses the legislature to FIRST spend its money on federally mandated programs (like Medicare) and constitutionally required systems (like Education).
States use rainy day funds (RDFs) as a cushion against financial shocks. In Texas, voters created the Rainy Day Fund in 1988, requiring that deposits be made: 1.) When unencumbered revenue remains after a legislative biennium, and 2.) When, oil and gas production taxes collected exceed those collected in 1987.
Texas Comptroller Susan Combs explained in November, 2009 that the state has 77.7-billion dollars in funds available to handle the 77.6-billion dollars in appropriations found in the current 2-year budget. That means the budget is balanced, but just barely, without a lot of room for error. But she also warned that if consumer spending didn’t pick-up, then there could be issues with the way the budget is currently balanced, specifically on the tax collection side. The good news is that state lawmakers didn’t touch the 9-billion dollar rainy day fund this last session, and Combs says that she’s anticipating a strong holiday shopping season in Texas, which could start the ball rolling toward economic recovery.
Contact James Hamilton: firstname.lastname@example.org Or find me at: Twitter Houston’s Workplace Examiner LinkedIN MySpace
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