$38 Billion In Cuts? Make That $353 Million

http://www.zerohedge.com/article/38-billion-cuts-make-353-million

To give it scale, let's use numbers the average Joe can relate to.  Say my total household debt is $75,000, but since I'm the government, I won't include long-term debt (Social Security, Medicare, Medicaid, Fannie Mae, Freddie), and will only count my immediate obligations and declare my official debt is only $14,400.  My income this fiscal year is $2,160, while I am spending $3,760, which equates to an annual deficit of $1,600.

So I finally convince my wife that we need to tighten our belts, as well as somehow increase our income in order to reduce/zero out that $1,600 deficit--because every annual deficit adds to our total debt level.  After many rounds of theatrics and arguments so loud our neighbors can hear us, we finally congratulate ourselves by declaring to the world that we have managed to trim $38 from our annual budget.  I repeat:  $38.

It gets worse.  Upon further inspection, our CPA, who is allegedly independent--despite having a track record of being easily influenced by our exhortations to doctor our books, declares the actual savings will only amount to $ 0.35.

That's it:  despite a $75,000 household debt, and spending $1,600 above my income (highly optimistic since the deficit calculation doesn't take into account total debt servicing expenses), I'm celebrating because I have managed to save 35 cents.

That's the true scale of the charade Congress and the Obama Administration have been partaking in "solving" our debt problem.  The only difference in my example is I've lopped off a bunch of zero's (i.e., I moved the decimal point 9 places to the left).

NOW do you understand why I've kept banging the drums that whatever action our government takes going forward:  cutting taxes, increasing taxes, increasing spending to stimulate the economy, and/or reducing spending in an attempt to get our fiscal house in order, it is too little too late.  No matter what stimulative or austere measures our politicians and monetary authorities take, it is GAME OVER.  The interest expense to service our humongous debt will overwhelm whatever tax revenues our government takes in.

Why is this important?  Pretty soon, our government's interest expense will outpace funding for our national defense.  Even if everything remained static and debt levels don't climb from here, every 1% rise in interest rates, increases our interest expense $144 billion (and interest rates WILL rise, since they're zero right now).  And pretty soon after that, that same debt-servicing expense will completely overwhelm every other vital government service.  The government will be paying off that debt before allocating funding to protect us, educate our children, feed the hungry, the retired, the disabled, and our veterans.  There will be no government services left = bankruptcy.  The difference being the government won't be around to bail out a bankrupt entity like GM or the banks like they did in 2008.  Because this time around, it will be the government itself that is bankrupt.

So how will the government feign solvency and creditworthiness?  They will keep printing increasingly worthless dollars, giving it fancy names and acronyms in order to hide the true nature of their counterfeiting schemes.  Meanwhile, savers, investors, Treasury bond owners, and anybody holding cash will all be wiped out.