“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Thursday, May 16, 2013

A rapidly shrinking federal budget deficit is upending bipartisan talks to reach a federal budget deal, illustrating the conundrum Washington faces with an improving near-term fiscal outlook but continued longer-term pressures tied to aging baby boomers.

10 Takeaways from the Latest CBO Budget Projections

The congressional budget scorekeeper projects the next decade of revenues and spending.
Peter Suderman | May 15, 2013

Yesterday, the Congressional Budget Office (CBO)—the nonpartisan budget scorekeeper for Congress—released its updated budget projections for the next decade. This year’s deficit projections are down dramatically. So is the federal budget suddenly in good shape? Far from it. In fact, debt levels are expected to remain unusually high for the foreseeable future.
But that’s not all the report tells us. Here are 10 takeaways from the CBO’s newest look at the future of federal spending and revenues.  
1. This year’s deficit will be lower than expected. The Congressional Budget Office now projects that the deficit will clock in at $642 billion this year, down from its earlier estimate of $845 billion.
2. But the downward revision in the annual deficit is mostly due to one-time changes. The revision is a product of two factors that won’t be repeated in the years to follow: a $95 billion dividend payment from mortgage giants Fannie Mae and Freddie Mac and a $105 billion revision in estimated tax collections. The CBO changed its revenue projections by just $95 billion for the entire upcoming decade—meaning that this is more of an unexpected bonus than a permanent change.
3. Projections of total annual deficits over the next decade aren’t down by much. In February, the CBO projected that total deficits over the next decade would add up to $6.9 trillion. The revision puts that number at $6.3 trillion.
4. Federal debt will remain unusually high. For the next decade—and beyond—the CBO expects that federal debt levels will continue to equal more than 70 percent of the GDP, hitting a low of just less than 71 percent next year before climbing to 74 percent in 2023. As the report notes, that’s a lot higher than the average of 39 percent over the past 40 years. And it’s also a lot higher than it was just a few years ago: In 2007, the federal debt was just 36 percent of GDP. It won’t stop rising at the end of the decade either. After 2023, debt as a percentage of the economy will “continue to be on an upward path.”
5. High debt levels will have major economic consequences starting in just a few years. The nation’s high and rising federal debt levels will “have serious negative consequences,” the budget office says. Namely, interest payments: “When interest rates return to higher (more typical) levels, federal spending on interest payments would increase substantially.”
6. Interest payments will soar to near historic highs. The CBO says that higher debt levels, combined with higher expected interest rates, can be expected to “sharply boost interest payments.” Assuming no changes in the law, net spending on federal interest will more than double as a percentage of the economy by 2023. In 2014, federal interest payments will equal about 1.4 percent of the economy. By 2023, the CBO projects, those payments will be about 3.2 percent—a figure that has only been exceeded once in the last 50 years.
7. More individuals will be paying higher taxes. The CBO expects that individuals will pay more relative to the size of the economy, in part because they will have higher inflation-adjusted incomes. As a result, those making more money will end up in higher tax brackets.
8. Medicaid spending will take up a greater share of the national economy, rising from 1.8 percent of GDP to 2.1 percent. The increase will be the result of both the Medicaid expansion in Obamacare and increases in how much the program spends on each individual on average. 
9. Major health care programs are finally going to beat out Social Security as the top spending category. By 2015 spending on what the CBO calls “major health programs”—which include Medicare, Medicaid, the Children’s Health Insurance Program, and private health insurance subsidies offered through Medicaid—will rise above Social Security. Here’s the chart:

10. This is already the rosy scenario. Under an alternative budget path, things will be noticeably worse. The CBO’s headline projections are based on the assumption that Congress will keep current laws in place. But if Congress decides to override scheduled cuts to Medicare reimbursements to physicians (as it has done every year for a decade), to end the spending trims called for by sequestration (as legislators continue to call for), and to extend certain other tax carve-outs that are typically renewed, then the budget picture looks worse: total deficits will be $2.4 trillion higher, for a total of $8.8 trillion, and federal debt levels will hit 83 percent of GDP—which, as the CBO reminds us, is the highest it’s been since 1948. 


  1. If the US does not lash military spending and at the same time freeze welfare spending. We're gonna go broke.

    Welfare spending in the forms of Social Security and Medicare will bust the budget and no number of carrier battle groups or M1 Abrams tanks will stop that from happening.


    1. >>>Social Security, Medicare Are Not Welfare

      Excluding benefits for the wealthy could undermine support for programs

      by: John Rother, from: AARP, May 20, 2011

      The following letter to the editor appeared in The Washington Post on May 19, 2011.

      Regarding Robert J. Samuelson’s May 16 column, “The Affluent Elderly”: Social Security and Medicare are not welfare programs. They are earned benefits that older Americans have contributed to over decades of hard work, a crucial distinction that Mr. Samuelson overlooked.

      The minority of seniors who are wealthy also contributed to these programs throughout their working lives, pay higher taxes in retirement to support them — and get proportionately less back in return. Premiums for Medicare Part B already are pegged to income as well.

      A means test for their earned benefits would erode the popular support that has sustained these programs and made them so effective in helping older households. Making Social Security more like welfare would surely lead to weaker benefits — and a growing burden on young people to support struggling elders.

      Of course, our nation needs to address its fiscal challenge. But policies must be fair and sensible. No one group should be singled out. The typical senior gets by on a modest income of less than $25,000 a year, so let's avoid caricatures.

      John Rother is executive vice president of AARP.<<<

      Some Libertarian you are, Bunk. Bunk wants to steal funds from the elderly. Push them over the cliff in their wheelchairs. Let the eat at the food kitchens, after stealing their hard earned social security money.

    2. When the time comes for Bunk, we know he will voluntarily give up his Social Security benefits. After all, he doesn't need them, what with his 360 acres of rich bottom land, stolen from the Indians, many cattle, horses, and artesian well, and pension from the military.


    3. Of course both Social Security and Medicare are Federal Welfare programs, boobie.

      The SCOTUS decided that, way back in 1960.

      Maybe that was before you took an interest in such things. Regardless, that is all Social Security is, a welfare program. Since Medicare is funded in a similar manner, it too is welfare to the beneficiary.

      Fleming vs Nestor, if you want to read the decision.

    4. If it is not welfare, in light of Fleming v Nestor, what would you call Social Security, boobie?

    5. It certainly not a defined benefit program, or a retirement account held in your name.

      It is a wealth transferring welfare program, designed to suck wealth from workers and transfer it to whomever the folks in DC think worthy...

      Marketed to you with fraud and deceit, by your own government, since 1960 and the SCOTUS decision.

      Folks laughed at Al Gore when he talked about putting those funds in a "Lock Box".

  2. Off topic but interesting -

    Russian warship docks in Israel for first time

    Monday, May 13, 2013 | Yossi Aloni

    For the first time since the establishment of the State of Israel, a Russian warship docked at the port city of Haifa earlier this month. The "Azov" of Russian's Black Sea Fleet came to Israel at the request of the Association of Russian War Veterans to help celebrate the anniversary of the victory over Nazi Germany.

    Jewish veterans of the Red Army who later immigrated to Israel were invited to participate in a ceremony aboard the massive ship.

    However, there was another even more important, even historical, reason for the visit - with the looming collapse of the Assad regime in Syria, Russia is on the lookout for new Middle East alliances.

    Russia has long maintained a large naval base in Tartus, the second largest port city in Syria. But with Syria's ongoing civil war likely to end in that country descending into factional warfare and chaos, Russia is concerned for its interests in the region.

    Recent reports are that Moscow is searching for a new Mediterranean seaport to maintain strategic balance in the region. Russian delegations have reportedly examined Egypt and Algeria.

    But Israeli officials say that the Arab Spring has changed Russia's view of Israel, and Moscow now understands that in this volatile and unpredictable region, the Jewish state is an anchor of stability.

    "There are things on which we do not agree with Russia, but there is a general understanding that we defend the same principles of democracy and security," said one official in Jerusalem. "They share our concern over Islamic fundamentalism taking over the Middle East. The Russians realize now more than ever that you can rely on Israel."

    The Russians very loudly publicized the Azov's visit to Israel, and their decision to mark the victory over the Nazis together with Jewish veterans. "Russia is proud of its connection to this historical event, and wants to remind everyone that we fought on the right side," read a statement from the Russians. "There is something to be understood from this for the contemporary Middle East. Where we decided to make anchor is a clear statement, both to the Israelis and the entire region."

    There was a general understanding that the Azov's visit was not a one-time event, and that other Russian warships would come calling in the near future. Israelis officials did not deny that they are open to further cooperation with Moscow.

  3. Who would ever believe the CBO over the Huffington Post?

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  5. Forget the Huffington Post, and the CBO, and listen to ol' Ruf. Unlike those two, he's been right from the git-go.

    The economy, going forward, is going to be quite different than the economy of the last two hundred years. As a result, nothing that is being written today in either organization is going to be very relevant.

    1. Wayne Gretzky said, "you have to skate toward where the puck is going to be."

      Of course, one might say that the key to Gretzky's genius was in his ability to "Know" where the puck was going to be.

      In our case, today, the puck is on an inexorable course toward stagnant, and then shrinking oil supplies, and incredible increases in intelligent automation. Taken together, these trends make for a "challenge," to say the least.

  6. On a related note, California produced 43,000 Megawatt Hrs of electricity from non-large hydro renewable sources, yesterday. That's a bunch.


  7. The world has remained afloat the last couple of years by paring back a whole lot of non-essential petroleum use in the United States, Japan, and Europe. There's not much low-hanging fruit left on that tree.

    Also, we have added a couple of million bbl/day of biofuels since 2005, but that is, largely, over for awhile.

    From here on out, Global Growth will depend on growing the supply of "affordable" petroleum; and, unfortunately, that pretty much is Not going to happen.

    It's going to get frustrating pretty quick; and then it's liable to get Ugly.

  8. Rufus, you are a good, good person.

  9. Meantime, family calls. Got a little "catchin' up" to do.