Offshoredrillin
04-02-2009, 09:09 AM
Below is an email I recieved from a local delegate here in MD who is also a client. while working on his car we became more acquainted as we talked and he listened to what a small business owner has to say. You owe yourself and your family to pay attention locally as these people are the next generation of Senators and Congressman, I would vote for Steve if he ran for president.
Spending Our Way Out
The federal stimulus, spending and bailout plans which have emerged in response to the current financial crisis are so convoluted and numerous that it's nearly impossible to add them all up. As best as I can tell, when you add up the $700 billion Wall Street bailout (officially the Troubled Asset Relief Program or "TARP"), the $789 billion stimulus plan (officially the American Recovery and Reinvestment Act), and the life rings tossed to Fannie Mae, Freddie Mac, AIG, Bear Stearns, the Detroit automakers, etc., the whole kit and caboodle is in the range of $2.5 trillion. That's a mind boggling figure. But what does a number like that mean? What it basically means is that the federal government will spend about $22,000 for each and every household in the US over the next two-and-a-half years. A large portion of those dollars will be sent down to the various State governments for them to dole out.
So, where will the federal government get all this money it plans to spend? Simple: borrow it. The US Treasury will enter the global capital markets and sell an unprecedented volume of US treasury bonds. If experience of the last several years is any guide, 25% of those bonds will be purchased ultimately by private investors, 25% by foreigners and foreign governments, and the remaining 50% by various arms of the US government, including the Federal Reserve Bank. This phenomenon of having one arm of the US government selling bonds to another arm of the US government is what is sometimes called "printing money." Printing money in this manner is a sure-fire way to create future price inflation, as too much money starts chasing too few goods.
Is $2.5 trillion a lot? Look at it this way: the total federal debt outstanding is now $11 trillion, and it took us 233 years to accumulate it. The federal spending plans will pile another 23% on top of that in a mere twenty months. To put it in personal terms, what is now a $96,000 "hidden" debt on each and every US household will soon turn into a $117,000 debt. And don't kid yourself; this debt really is yours. You pay the interest on it through your taxes. It's sort of like paying the mortgage on a summer house, except you don't have the summer house.
What does all this mean for Maryland? Maryland's share of the dollars being directed to the States is $3.7 billion over the next two-and-a-half years. That's about $1,800 per Maryland household. Of that amount, $1.3 billion will be allocated to health care for the needy (Medicaid), $1.1 billion to public education, about $550 million to a grab bag of other spending programs, and less than $800 million to "infrastructure," which refers to the "shovel-ready" road, bridge and mass-transit projects that were supposed to be the point of the whole thing in the first place. The fact of it is that nearly 80% of this $3.7 billion windfall will be spent on government programs that are normally funded in the operating budget and that do not have a finite life. In other words, they are ongoing spending programs that will be hard to stop.
All of which begs the question: If we maintain spending levels through 2011 at over a billion dollars more per year than we can actually afford by relying on an artificial and temporary infusion of federal cash, what will happen when that cash runs dry? My best bet is that, given the always-upward push of various spending formulas, two years from now we will be facing a $1.5 billion or greater shortfall in 2012, which is about the same size shortfall as that which precipitated the infamous Special Legislative Session of 2007 and the largest tax increase in the State's history. At that point, severe corrective measures will have to be taken: either cutting the budget to bring our spending into line with reality or imposing yet another massive tax on a state that already has the dubious distinction of being the fourth most-taxed state in the US. Watch your wallet.
-Delegate Steve Schuh
Steve Schuh | P.O. Box 1628 | Pasadena | MD | 21123
Spending Our Way Out
The federal stimulus, spending and bailout plans which have emerged in response to the current financial crisis are so convoluted and numerous that it's nearly impossible to add them all up. As best as I can tell, when you add up the $700 billion Wall Street bailout (officially the Troubled Asset Relief Program or "TARP"), the $789 billion stimulus plan (officially the American Recovery and Reinvestment Act), and the life rings tossed to Fannie Mae, Freddie Mac, AIG, Bear Stearns, the Detroit automakers, etc., the whole kit and caboodle is in the range of $2.5 trillion. That's a mind boggling figure. But what does a number like that mean? What it basically means is that the federal government will spend about $22,000 for each and every household in the US over the next two-and-a-half years. A large portion of those dollars will be sent down to the various State governments for them to dole out.
So, where will the federal government get all this money it plans to spend? Simple: borrow it. The US Treasury will enter the global capital markets and sell an unprecedented volume of US treasury bonds. If experience of the last several years is any guide, 25% of those bonds will be purchased ultimately by private investors, 25% by foreigners and foreign governments, and the remaining 50% by various arms of the US government, including the Federal Reserve Bank. This phenomenon of having one arm of the US government selling bonds to another arm of the US government is what is sometimes called "printing money." Printing money in this manner is a sure-fire way to create future price inflation, as too much money starts chasing too few goods.
Is $2.5 trillion a lot? Look at it this way: the total federal debt outstanding is now $11 trillion, and it took us 233 years to accumulate it. The federal spending plans will pile another 23% on top of that in a mere twenty months. To put it in personal terms, what is now a $96,000 "hidden" debt on each and every US household will soon turn into a $117,000 debt. And don't kid yourself; this debt really is yours. You pay the interest on it through your taxes. It's sort of like paying the mortgage on a summer house, except you don't have the summer house.
What does all this mean for Maryland? Maryland's share of the dollars being directed to the States is $3.7 billion over the next two-and-a-half years. That's about $1,800 per Maryland household. Of that amount, $1.3 billion will be allocated to health care for the needy (Medicaid), $1.1 billion to public education, about $550 million to a grab bag of other spending programs, and less than $800 million to "infrastructure," which refers to the "shovel-ready" road, bridge and mass-transit projects that were supposed to be the point of the whole thing in the first place. The fact of it is that nearly 80% of this $3.7 billion windfall will be spent on government programs that are normally funded in the operating budget and that do not have a finite life. In other words, they are ongoing spending programs that will be hard to stop.
All of which begs the question: If we maintain spending levels through 2011 at over a billion dollars more per year than we can actually afford by relying on an artificial and temporary infusion of federal cash, what will happen when that cash runs dry? My best bet is that, given the always-upward push of various spending formulas, two years from now we will be facing a $1.5 billion or greater shortfall in 2012, which is about the same size shortfall as that which precipitated the infamous Special Legislative Session of 2007 and the largest tax increase in the State's history. At that point, severe corrective measures will have to be taken: either cutting the budget to bring our spending into line with reality or imposing yet another massive tax on a state that already has the dubious distinction of being the fourth most-taxed state in the US. Watch your wallet.
-Delegate Steve Schuh
Steve Schuh | P.O. Box 1628 | Pasadena | MD | 21123