The Voice of Reason: Do We Have a Revenue Problem or a Spending Problem?

The latest negotiations between the White House and Congress to avoid the fiscal cliff centers around the "balanced approach" supported by President Barack Obama during the recent campaign. 

Now, the President seems to be focused almost entirely on raising taxes for the most successful Americans, while the Republicans seem to be touting the approach once favored but now seemingly abandoned by the President -- increasing revenue and making spending cuts. Without significant spending cuts, though, the Republican-controlled House simply will not agree to raise taxes on the highest-earning Americans. In contrast, the President has outlined a specific plan for raising taxes on Americans earning over $200,000 as individuals or for married couples earning over $250,000, but has avoided any details whatsoever on how he would cut the federal budget.

But does America have a revenue problem, or does it have a spending problem?  If you're like me, once people begin talking about trillions upon trillions of dollars, it's nearly impossible to fathom.  But once you put the debt into context in numbers that people can understand, you begin to see a much clearer picture.

If America were a household, and we took away five zeros to make the numbers manageable, we would be earning about $25,000 per year (total annual government revenue).   This year, however, we will spend about $38,000 (national budget), which means that we had to put about $13,000 on our credit card (annual deficit), bringing our total credit card debt to about $164,000 (total national debt).  This year, the interest alone on that debt will cost us about $4,500, nearly one-fifth of what we took in.

By taxing the most successful Americans more, the President will add about $16,000 to our household income over the next 10 years, which equates to a paltry $1,600 per year.  However, his most recent budget projections show a deficit of at least $10,000 per year which will be added to our credit card debt. This means that by the end of his second term our total household debt will be well over $200,000.  In just eight years, this President will have added about half -- $100,000 -- of our nation's total credit card debt. The interest alone on our debt will cost our household around $6,000 per year by 2016, if interest rates remain low.

Adding to this national financial mess is the fact that our entitlement programs are growing much faster than any increases in our revenue.  Within two decades, the entitlement programs of Social Security, Medicaid and Medicare will consume 100% of annual revenue, leaving nothing for education, defense or anything else.  If the trend of spending more than we take in continues, couple of decades the interest alone on our national debt will consume 100% of our annual revenue. 

America is facing a fiscal cliff of increased taxes for nearly all Americans on January 1, 2013, if Congress and the President can't agree on a plan to extend the Bush-era tax cuts.  Our nation faces a much bigger precipice -- a Grand Canyon-like cliff -- if we don't address the debt problem and growing entitlement programs that will bankrupt this country and send the entire world into a deep depression.

As one can see, America does not have a revenue problem.  We simply have been spending, and continue to spend, money we just don't have.

This President has done more to bankrupt this country than any other President before him.

One way or another, though, this spending will stop -- either through managed budget cuts and a well-defined plan to cut our debt -- or through a bankruptcy and deep depression that will be much more painful for all Americans.