Slope

The President’s 2013 budget makes no effort to implement substantive cuts in government spending and absolutely no attempt to restructure our entitlements. Instead, the Presdient relies on class warfare arguments that higher taxes on “the rich” will somehow reduce our deficits in a meaningful way. Unfortunately, tax increases cannot and will not change the slope of a debt curve that has become frightening during the Obama administration. The Zero Hedge blog provides the appropriate graph:



The red curve represents our growing deficit during the Obama administration and the blue curve represents the growth in GDP. Early this month, the curves intersected. More important, the slope of the deficit curve is frighteningly steep—the result of President Obama’s belief that big government and more spending will somehow lead to prosperity.

But why is all this important? Greece was saved from imminent bankruptcy by the EU after its debt to GDP ratio reached 160%. As a condition of their bailout, the EU demanded significant spending cuts, reductions in public pension, cuts in entitlement across the board. The result was rioting in the streets. And Greece is not out of the woods yet. The EU just kicked the can down the road.

If Mr.Obama is re-elected and his current spending policies continue (or worse, are accelerated), the trajectory of the debt and GDP curves will put our debt at approximately 120 percent of GDP at the end of his second term. That’s the level that Greece is at after the EU bailout. Virtually every independent observer characterizes Greece as an economic basket case. There are, of course, differences between the United States and Greece, including one rather sobering one: There is no entity on this planet with the resources to bail us out when we reach the inevitable conclusion of the big government spending spree that Barack Obama has initiated.