Across the board, government revenues are down dramatically. The federal government is in a very similar situation to the dairy industry, which has suffered a dramatic drop in revenues. In fact, tax receipts are on pace to drop 18% this year, the biggest single-year decline since the Great Depression.
That number becomes even more dramatic when one considers that the government’s tax rates have absolutely exploded since the Great Depression. The numbers are even scarier when one adds in the fact that, rather than being in a good financial position, the federal deficit is expanding to a record $1.8 trillion.
But, instead of cutting back, reducing costs and eliminating any unnecessary expenses (such as the dairy industry is doing), those in our nation’s capital are expanding nearly every social program in the budget and even contemplating a major expansion of health care. I would underscore again that this is despite individual income tax receipts being down 22% and corporate income taxes (in part due to incentives and tax breaks in the $700-billion stimulus package) being down 57%.
Any banker taking a look at the U.S. government’s balance sheet would come to one inescapable conclusion – the tax system is inadequate to support the promises already made. But, the government doesn't operate by the same rules as other enterprises. Even Medicare and Social Security revenues are dropping, with Social Security now on a pace to run out of money even sooner than projected, possibly as early as 2013. Still, domestic spending is projected to be up by a whopping 11%. Even defense is scheduled to increase by 4%.
This situation has grave implications for agriculture because taxes are expected to increase significantly both directly and indirectly. The current imbalance between spending and income can’t continue, not even for the government. If the economy doesn't rebound quickly, then programs will have to be slashed.
Of course, the advantage the government has is that it can always print more money, thus devaluing the dollar and paying back debts with the devaluation. But that poses its own set of problems.
Like individual operations, however, governments eventually have to pay back the debts they incur. The day of reckoning is approaching. And with programs like nationalized health care and cap and trade expected to cost trillions over time, and with the massive social programs already in place underfunded and or heading to insolvency, the clock is now running down faster than anyone thought possible.
But wouldn't agriculture be fun if we could just keep spending more than we take in? But then, we probably would have to win an election to farm or ranch.