TrimTabs Money Blog

President Obama announced yesterday that he wants to spend $3.8 trillion fiscal 2013 ending September, up from $3.6 trillion this past fiscal year. That is a 5.5% increase in spending over two years. At the same time government revenues, almost all income tax collections, are about $2.4 trillion today and has been growing by no more than $100 billion yearly.

Let’s see, the US government will spend $3.7 trillion this fiscal year, and that is just over $300 billion a month. The government is collecting about $2.4 trillion annually, or about $200 billion per month. The missing $100+ billion each month to pay for the US government spending comes from printing money. Wouldn’t you like to cover the shortfall in your income by printing money?

The PR spin is that despite revenues and expenses growing at the same $100 billion this year, next year the budget deficit will shrink.  How? Revenues will magically grow faster than spending.

But before we talk about revenues, I have a hard time believing that the US government can slow spending growth to just $100 billion per year. That is possible, but so is my losing a lot of weight by Christmas, possible but not likely.

Looking at the revenues, President Obama and his advisors want us to believe that government revenues will grow by $400 billion from today’s $2.4 trillion pace, or 16% over two years. They expect to get $200 billion a year from the abolition of the so-called Bush tax cuts plus other new taxes on the rich on top of  $100 billion annual growth from higher wages and salaries..

Unfortunately the real world is different from the Obama fantasy. Currently take home pay is $6.3 trillion for everybody who pays taxes. That is up about $400 billion annually from the $2009 low. But take home pay is still well below the $7.1 trillion annualized in early 2008.

What do you think will happen to the current $6.3 trillion in take home if as and when the government takes away an extra $200 billion annually – in essence an 8% tax hike on all?

Does this administration or anybody really think that a $200 billion increase in taxes in an economy where take home pay has been growing by $100 billion per year will result in anything other than an economic contraction or slow growth at best? Slower growth in the economy means two things, less tax revenue for the government and more spending on safety net stuff.

Unfortunately most Americans do not really get is that all government spending does is give money to people, whether they do anything useful with it or for it. No value judgment here, I am just stating what is so.

What is also so is that our government, as well as the European and the Japanese versions, want us to believe economies will grow faster if we keep taking more money from workers and give that money to government workers and social welfare recipients.

Is this world insane or am I insane?

Charles Biderman
President & CEO TrimTabs Investment Research
Portfolio Manger TrimTabs Float Shrink ETF (TTFS)