Monday, December 31, 2012

The Fork In The Road Which Lead Us To The Fiscal Cliff - We Chose To Be Exactly Where We Are

From  Repair_Man_Jack at

The Fiscal Cliff is a problem. We typically blame people not named us when problems occur. It’s easier and less painful than solving the problem. Here the problem is that the current US President and Congress (The US Senate in particular)* have both spectacularly failed in their management of the national fisc. And worse than that, they came to a fork in the road, after the crisis of 2008, and specifically chose *not* to manage our nation’s fiscal affairs. This innumerate choice of directions lead America to the so-called Fiscal Cliff.

If we decided to solve America’s fiscal issues, it wouldn’t hurt to mine some historical data. Since 1950, the United States Government has averaged expenditures proportional to 19.61% of the same year GDP with a standard deviation of 2.25%. Our government has booked revenues equivalent to 17.65% of same year GDP with a standard deviation of 1.26%. If both events occurred at random, we’d have a 6.07% chance of a Federal Budget actually balancing.** This would suggest that we’ve set up a systemic and nasty spending problem despite pious insistence otherwise...

Since 2003 and especially since 2008, no spending plan was contrived that had any relation whatsoever to the probable level of revenue that the US Government historically succeeds in collecting. It is as if we hit a fork in the road last decade. Our leaders decided that our government no longer had an obligation to manage Federal Expenditures. The chart below shows how unlikely it was that any of our last eleven budgets even could have been balanced assuming a typical year of historical government revenues.

Read the rest here...

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