OldSouth Attempts To Understand The Math: This Week's Federal Budget Resolution Negotiations

The coverage has been breathless and constant--the pitched battle over whether Congress will reduce 2011 Federal budget spending by 60 billion dollars, or 30 billion dollars, or some number in between, or perhaps not at all, if DaPrez, Mr. Harry and Mizzzz Nancy had their way.

OS has been busy this week, trying to keep the plates of several unrelated projects spinning, enjoying the opening week of baseball season (Boston's zip-4-six??), and the opening day of the Masters. He has high hopes for young Mr. McIlroy, and Mrs. OS is a fan of Mr. Choi.

But, he has attempted to understand the math in the context of the emotionally charged language that is flooding the culture--e.g., 'If'n yuh don't agree wif me, yew is a scalawag of the worst kind.' As always, the Left is more practiced at spewing the poison, but there's lots of it going 'round this week. The Religious Right seems to want to score points as well. Somehow, a bankrupt United States, and the chaos, poverty and despair that would cause, is not an ethical issue in their minds. Sheeeeut.

So, with a bit of time off this evening, he began to review numbers, to see what is being talked about. After all, 60 billion dollars sounds like a boatload-o-money-hunney to a normal drudge like OS.

He decided to look up the amount of money intended to be spent by The Gubb'mint in FY 2011. The Budget that Our Beloved Leader proposed to Congress back in February of 2010, when the Dems controlled both houses, calls for spending $3.83 trillion and the federal deficit is forecast to be $1.56 trillion in 2010 and $1.27 trillion in 2011. Total debt is budgeted to increase from $11.9 trillion in FY2009, to $13.8 trillion in FY2010, and $15.1 trillion in FY2011.

That's a lot-o-munney, hunney!

OS had to call up a spreadsheet, and start attempting to type in that figure. He had to format cells for lots of digits and decimal points to make this exercise work.

So, sez-he/he-sez:

383, three hundred eighty three.

383,000 three hundred eighty three thousand. Let's add three zeros, multiplying it by a thousand. Sort of like using the spreadsheet as an abacus...know-whudd-ah-mean?

383,000,000. Three hundred eighty-three million. Let's add another three zeros...

383,000,000,000 Three hundred eighty-three billion. Let's multiply by 10, one zero.

3,830,000,000,000 Three trillion, eight hundred thirty billion. That's so many zeros, OS had to dink with the spreadsheet's cell formatting. (His laptop is beginning to smoke, by the way.)

Let's go back to the proposed reductions in spending of, say, $60 billion, which our friends at the NEA call 'right-wing lawmakers insisting on draconian cuts to critical services'. Dem Waskawy Repubwikans!

That figure looks like this: 60,000,000,000.

OS's poor head hurts looking at all those zeros, so he decided to begin removing equal numbers of zeros from both numbers, which would keep the relationship between the values of those two numbers constant.

So, if we remove, say, six zeros from each number, we end up with--

3,830,000 and 60,000. Looks like a small business now. Hmmm, subtract another zero on each side.

383,000 and 6000--looks like a mom-n-pop gas station numbers.

38,300 and 600, looks like a single person's numbers.

3830 and 60 -- a month's take-home and one tank of gas in the age of Obama.

So, what percentage of 3830 is 60?

60 divided by 3830 gives us: 0.015665796

Excel tells OS to multiply this by 100 to arrive at a percentage: 1.5665796345 percent.

Round to two decimals: 1.57 percent.

Now, in reality, they're only talking about cutting about 30 billion dollars, so let's divide 1.57 by 2: 0.785 percent. It appears Mr. Harry, Miz Nancy, Our Beloved Leader and the NEA consider a reduction in spending by 0.785 percent to be unthinkably draconian.

0.785 percent. That is what is being fought over. Or perhaps, what is being fought over is the idea that spending should be restrained at all. Somehow, it will all be paid for, by the rich perhaps. Or we'll just borrow the difference, and leave it for the grandchildren to pay.

Now, let's look at another ratio: If we are running a 1.56 trillion deficit on a 3.83 trillion budget, that means we're borrowing 1.56 trillion a year. What's that percentage?

1.56/3.83=40.73%

The Treasury is borrowing (in our name) almost 41 cents on every dollar Duh Gubbermint is spending on the Federal level. We owe upwards of 15 trillion dollars, after decades of this behavior.

Lessee, OS has to reset his spreadsheet again. If we cut spending by 30 billion, what percentage of the national debt have we potentially shaved off?

Pull as many zeros as we can from both numbers and it looks like 1500 and 3.

3 divided by 1500=.002

Multiply by 100 to determine percentage: .2 percent. Two-tenths of one percent shaved from a debt of 15 trillion dollars.

Now, if we owe 15 trillion dollars, what's our interest payment obligation? Right now, interest rates are at an unhistorical low. Everything reverts to the mean, so let's say the day comes when the market decides it wants us to pay a nice round number, say 5% on our borrowed money, per annum.

15,000,000,000,000 times .05=750,000,000 Seven hundred fifty billion, which must be paid, lest we default. If we default, the dollar soon ceases to be recognized as a medium of exchange anywhere. Think Argentina...

What if we end up having to pay 750 billion dollars of interest on an annual budget of 3.8 trillion? That would mean 19.6% percent of the annual expenditure would be on interest payments alone. Not principal paydown, just interest. Wonder how long it would be until the market decides they'd like 8% on their money to compensate for the level of risk that 19.6% represents. Hmmm...that could get ugly, quickly.

Think Greece, Portugal, Spain, Argentina....

Gotta go, OS's laptop is smoking again!

Besides, it's bottom of the 7th, the Orioles are beating up on the Tigers 9-5. Two on, two outs, count is 1 and 2. Those are manageable, understandable numbers.