The United States
Must Cap Spending at
18% of Gross
Domestic Product
To Avoid Bankruptcy
20,000,000
1940
1942
1944
1946
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011 estimate
2013 estimate
2015 estimate
Gross Federal Debt (millions)
Federal Debt
Source: CBO Historical Table 1.7
In three years that
number will be
20 trillion.
25,000,000
In 2011 we hit 15
trillion dollars in
debt.
15,000,000
10,000,000
5,000,000
0
Federal Revenue
• Over the past 81 years, the American
people have shown that they tolerate an
average of 15.9% of GDP being collected
as Federal revenue
• Since the end of World War II that
number has increased to 17.7% of GDP
• 2009 Federal revenue was 15% of GDP
20
1930
1932
1934
1936
1938
1940
1942
1944
1946
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
% of GDP
Federal Revenue as % of GDP
25
17.7%, average
since the end of
WWII
15
15.9%, the
historical average
10
5
0
Source: CBO Historical Table 1.2
Federal Spending
• Since the end of World War II the Federal
government has spent more than the
average revenue collected; an average of
19% of GDP
• Since the end of World War II that
number has increased to 20% of GDP
• 2011 Federal Spending was 24% of GDP
30.0
25.0
10.0
5.0
1930
1932
1934
1936
1938
1940
1942
1944
1946
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
% of GDP
Federal Spending as % of GDP
50.0
45.0
40.0
35.0
20%, average
since the end of
WWII
20.0
15.0
19%, the
historical average
0.0
Source: CBO Historical Table 1.2
Ever Present Deficits
• In the past 81 years we have had 66
deficits and had only 13 surpluses
• This is why our debt is as high as it is
today: currently over 15 trillion dollars
Federal Spending and Revenues as % of GDP
Revenue
Spending
50.0
45.0
Where the black shows
through the red there
was a surplus, otherwise
there was a deficit
40.0
35.0
Deficit
Surplus
25.0
20.0
15.0
10.0
5.0
0.0
1930
1932
1934
1936
1938
1940
1942
1944
1946
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
% of GDP
30.0
Source: CBO Historical Table 1.2
Paying the Interest on the Debt
• Just like when an individual or business
borrows money, the Federal government has to
pay interest on its borrowed funds
• The annual interest rate paid on the Federal
debt is reflected by the interest rate of US
Treasury Bonds
• Currently we pay about 2% - historically we
have paid an average of 4.9%
Will We Go Bankrupt?
• In just over 3 years, our debt will reach 20 trillion dollars. If the
composite interest rate on that debt goes up just 1 percentage
point, we will pay 600 billion dollars a year in interest - that is 3
times what we paid in 2011
• We cannot pay that amount without cutting 400 billion dollars
from the budget – something Congress has never come close to
doing
• See the next two slides – the 2012 White House Budget
numbers show in 2015 an expected interest rate of 4 to 5
percent and an expected debt of just under 20 Trillion dollars.
• We will not declare bankruptcy – instead, the Federal Reserve
will pump all the money we need into the main money supply –
this is called a “Fed Default” – and we will have DOUBLE
DIGIT INFLATION
White House 2012 Budget
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/tables.pdf, page 202
White House Budget 2012
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/tables.pdf, page 203
Double Digit Inflation is Worse
Than a National Sales Tax
• High inflation, as high as 20%, raises the cost on
EVERYTHING – No product or service is excluded.
• High inflation raises the cost on EVERYONE – No one is
exempt – the poor and middle class are hurt the most
• People with assets benefit because their assets increase in
value – the rich get richer faster and the poor suffer more
• Each year the inflation compounds – just like an
additional annual sales tax
• In a period of just a few years, the value of the dollar will
be cut in half
• The misery index (unemployment + inflation) of the
1970s will return - with a vengeance
Avoiding Double Digit Inflation
• The Federal Reserve will only trigger inflation if
we cannot pay our interest on our debt – so let’s
not get to that point!
• Raising tax rates will not help because no matter
what tax rates have been (they have been as high
as 90%), tax revenue has been an average of 18%
of GDP
• Congress must cap spending at that number, 18%
of GDP, and send a clear message to the world
that we FINALLY intend to manage our
checkbook responsibly – this should help keep
the interest rate on our debt low
What You Can Do
• Use the Bubble view of the current federal budget on
this site to create your own “18%” budget - then share
it with others and show them how “doable” it is
• Support the TASC (Term and Spending Cap)
Amendment – “Spend over 18% and your time in
Congress is spent!”
Term and Spending Cap (TASC)
Amendment
“Congressional members presiding
over a fiscal year with a Federal
Spending to Gross Domestic
Product ratio of over eighteen
percent are denied another term. “
TASC Amendment
• The average annual Federal revenue collected since
WWII was 18% of GDP, regardless of how high or low
the tax rates were. Spending at a rate higher than this,
except for times of great national peril, is irresponsible.
• In a time of great national peril, like war, when more than
18% must be spent, congressional members need only
forfeit their next term. Patriots serving in Congress will
gladly pay this cost.
• Revenue collected over the 18% will be applied to the
national debt. Once the national debt is paid, overages
will be refunded to the taxpayers.
TASC Amendment
• Once Federal spending is capped, wealthier taxpayers will
have fewer objections to paying higher tax rates
• We will never end the corrupt cronyism in the Federal
Government but we can LIMIT it. The Balanced Budget
Amendment does not LIMIT spending – it only LIMITS
deficits.
• The Balanced Budget Amendment restricts our ability to
react to major security or economic threats. TASC allows
for ABSOLUTELY NECESSARY overspending –
members of congress simply must surrender their next
term.
TASC Amendment
Congress will never pass an amendment policing
themselves so we will have to call for a
Constitutional Convention to pass the amendment,
independent of Congress. We will need 2/3 of the
states to call for the Convention and then 3/4 of the
states to ratify the amendment. We need at least
10,000 people in each state to rally at their state
capital to persuade state legislatures to call for the
convention.
TaSC Amendment
• Please help support the passage of this amendment by
purchasing your TASC Amendment Flag. This beautiful
flag is made by Annin, the oldest flag manufacturer in the
U.S., and sold independently by Flag World
(www.aflagworld.com). Bring it with you when you are
called to show your support in person at the TASC
Amendment rally in your state capital.
• This web site will track how many flags have been sold in
each state. As each state reaches the 10,000 mark we will
call for the TASC Amendment rally at that state's capital.
• Now you can finally do SOMETHING about our
irresponsible Congress. Will you?
TaSC Amendment – Talking Points
•
Limiting spending is the only way to avoid the coming Federal Reserve default (as early as 2015) and
the resulting multi-year double-digit inflation that will result.
•
Congress clearly demonstrated in 2011 that they are incapable of limiting spending.
•
This is a non-partisan issue. From the left’s perspective, a bankrupt government loses its power to do
ANY good, and from the right’s perspective a government SHOULD limit their spending to only what
they take in.
•
The amendment avoids the debate on revenue and taxes. Regardless of what group has been the target
of a tax or loophole, and how high or low the tax rates have been (they have been as high as 90%), the
American people have demonstrated they are only willing to pay 17.7% of Gross Domestic Product. It
is healthy to debate the most efficient and fairest way to collect that revenue, but childish to assume that
MORE can be reliably collected.
•
Most money spent by the Federal government is done wisely, but much of it is not, especially on
political crusades and wars. If Congress feels that a situation is SO CRITICAL TO THE COUNTRY
that overspending is required, they should feel the pain as much as the rest of us. The TaSC amendment
will finally make waging expensive, superfluous, wars costly to the members of congress and not to just
the brave soldiers that fight them.
•
As the largest economy in the world, it is our duty to lead the rest of the world out of the immoral
monetary policies of the last generation – the conjuring of wealth instead of the creation of wealth. The
U.S. must send a clear message to the rest of the planet that the people of the U.S. have directed their
government to live within their means and that we , the people, will create wealth, not print money.
•
A nation that cannot properly work a checkbook does not deserve to be world leader.
Summary
If we do not cap Federal spending at the
historical level of Federal revenue, by 2015 we
may find ourselves unable to pay the interest on
the Federal debt. The Federal Default and
inflation that will ensue will hurt the people
without assets: the poor and middle class.
There is a way to avoid this calamity. Please
support the TaSC Amendment.