The Only Two Charts That Matter For The US, And A Q&A On The Fiscal "Debate" From Goldman Sachs

Tyler Durden's picture

Lately, there has been a lot of chatter by virtually everyone with some soapbox to stand on, about this and that. That's swell... if mostly irrelevant: by now everyone should be aware that only two charts actually matter, both of which are painfully self-explanatory.

Chart 1: The Federal Budget

Chart 2: The growth of the US debt in relation to the soon to be hiked debt ceiling.

And, for the purists, we'll add another chart, this time showing the continuing persistent deterioration in the budget due to mandatory spending. The question is where, absent someone discovering teleportation or some other revolutionary technological invention, will the paradigm technological step up allowing for a surge in revenues, come from.

And since even the most self-explanatory is supposed to come with some narrative, here is Goldman's most recent Q&A on the Fiscal "Debate" - although we wonder just what debate is being referred to: after all D.C. is nothing but a smokescreen for Wall Street which demands either more dollars in circulation or more public debt issued in order to keep the wheels turning. Without either of these it's game over.

Q&A on the Fiscal Debate

The formulation of federal fiscal policy is typically of interest to markets mainly when it involves large changes outside of the annual budget process, such as the countercyclical policies enacted in 2008 and 2009, or other one-off policy decisions, such as the extension of expiring tax measures at the end of 2010. By contrast, the appropriations process is normally not important to market participants apart from those focused on the effect on individual industries.  However, split control of Congress and an increasing focus on fiscal sustainability have raised the profile of seemingly routine budget matters. In what follows we attempt to clarify some of the issues currently in play that are of particular interest to markets:

Q: What is currently being debated?

A: Discretionary spending for FY2011. Defense and non-defense discretionary spending (see Exhibit 1) are projected to account for $1.373 trillion in federal outlays this year, or roughly 39% of total federal spending (Exhibit 1). But with the current fiscal year halfway over, the spending level is still uncertain. Congress has funded the government through a series of six “continuing resolutions” (CRs) while it has debated full-year spending levels. These short-term spending bills are not uncommon, and are often used to provide funding for a few departments at the previous year’s level while appropriations work is being wrapped up in Congress.

However, it is unusual to be operating under a CR halfway through the year. The most recent two CRs also included a combined $10bn in cuts, and lawmakers are negotiating additional cuts of between $33bn and $40bn from current levels to be included in the funding bill for the full fiscal year. As of this writing, differences have narrowed, but the exact amount and composition of cuts is still unclear. Without an extension of spending authority, either through full-year appropriations (the goal of this week’s fiscal discussions) or another short-term measure (a fallback in the absence of a full-year bill), the federal government would partially shut down until funding is restored. Funding expires at the end of April 8.

Q: Why is there such a great focus on non-defense discretionary spending?

A: Non-defense discretionary is only 12% of the budget, but cuts here are often a first step in fiscal consolidation. While discretionary spending cuts will not resolve the budget imbalance on their own, this segment of the budget is addressed once a year, creating a natural first opportunity for cuts. It also tends to have fewer vested constituencies compared with mandatory spending, which is comprised mainly of benefit payments to individuals. In previous research we have found that the level of non-defense discretionary spending is the most responsive to the debt to GDP ratio, probably for these reasons.

Q: Is the possibility of a shutdown related to the debt limit?

A: The debt limit is a legally separate issue, with potentially more important consequences if action is delayed. For historical reasons that stretch back to the First World War, Congress imposes a legally binding limit on the amount of debt the Treasury may issue. Once the Treasury reaches the limit, a prolonged failure to raise it would require the government to reduce outlays to the amount of revenue it takes in, and would not allow it to smooth monthly revenue or spending fluctuations with borrowing. So while the non-essential functions that would cease in a funding lapse account for a few hundred billion per year in federal spending, maintaining the current debt limit would require outlays to decline by an amount comparable to the budget deficit, which we expect to total $1.35 trillion this year and $1.025 trillion in FY2012.

Q: When will the debt limit be reached, and when will it be raised?

A: Probably in June. Treasury has projected that it will reach this statutory limit no later than May 16 (Exhibit 3). Once the limit is reached, the Treasury has several strategies it can use to create additional room under the limit, but after using these options the Treasury projects the limit will become a constraint no later than July 8.

Q: What about next year’s budget?

A: A debate over additional spending cuts is likely. Even though the FY2011 process has not yet concluded, the process for the fiscal year starting October 1 has already begun. The congressional budget process begins with the budget resolution, which recommends spending and revenue levels for the next ten years. The House budget resolution, which passed in committee this week, assumes a reduction in non-defense discretionary outlays of $79 billion from the CBO baseline in FY2012. Along with changes in other areas of the budget, the House budget resolution proposes to reduce overall spending by $110 billion in FY2012, and aims to reduce the 10-year deficit by $4.4 trillion. To achieve this, discretionary spending reductions for FY2012 would likely need to be at least as large as those being debated for the current fiscal year. No budget resolution has been released yet in the Senate.

Agreement this spring on the budget resolution may be difficult. However, the process can continue without an agreement; in fact, the resolution by definition does not become law, and Congress has failed in several recent years to enact a budget resolution. That said, the House and Senate must agree on appropriations legislation for FY2012—or at least another short term continuing resolution—by October 1, 2011 to avoid risking a shutdown.

Apart from the normal budget cycle, lawmakers must also decide whether to extend the 2-point payroll tax cut and expanded unemployment insurance enacted in late 2010, both of which would expire at the end of 2011 in the absence of an extension.

Q: When will Congress tackle structural reforms?

A: The debate has begun, but major reform seems more likely after the election. While discretionary spending changes occur often, changes to tax policy and mandatory spending programs tend to produce the largest policy-driven changes in the budget balance (Exhibit 4 shows the 5-year fiscal effect on the budget balance of all legislation enacted in a given year, as estimated by the Congressional Budget Office).
Divided control of Congress appears to be a significant obstacle to these sorts of changes at the moment. Moreover, neither party appears interested in changes to the Social Security program that would reduce spending in the next decade. Some lawmakers have put cuts in health-related entitlements on the table, as have the various fiscal commissions, but in the wake of last year’s health care law, which was partly financed with $455bn in Medicare cuts over ten years, the “easy” reductions in that program have already been made.

Q: Does policy uncertainty increase the fiscal risk facing the US?

A: While potentially unsettling in the very short term, multiple upcoming deadlines could actually increase the likelihood of meaningful fiscal reforms. With two important deadlines ahead, fiscal policy will remain in the headlines. It is possible that the potential for a shutdown will return ahead of FY2012, which starts October 1. In addition, enacting an increase in the debt limit large enough to last through the 2012 presidential election could be difficult, as it would likely require an increase in the range of $2 trillion. Since it is unclear whether lawmakers will be willing to pass such a large increase at one time, the issue could be debated more than once.

While all of these deadlines could result in additional uncertainty, they also create multiple opportunities to enact fiscal reforms. At a minimum, additional spending cuts for FY2012 look likely, on top of what is agreed to for FY2011. Moreover, discretionary spending caps and other fiscal rules are very likely to be debated as part of these measures. Although it is likely to be at least as difficult for lawmakers to  agree on multi-year fiscal restraint as it has been to agree on appropriations for this year, there are two reasons to think this could be achieved: first, prior debt limit increases have often been coupled with important budget reforms, so there is a precedent. The 1997 debt limit increase was packaged with significant entitlement reforms. The 2010 increase was combined with statutory pay-as-you-go rules.

Second, now that both parties have opened the door to discretionary spending cuts, imposing hard multi-year caps on this segment of the budget looks like a realistic possibility as these upcoming fiscal deadlines are addressed.

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Muir's picture

And since even the most self-explanatory is supposed to come with some narrative, here is Goldman's most recent Q&A on the Fiscal "Debate" - although we wonder just what debate: after all D.C. is nothing but a smokescreen to Wall Street which demands either more dollars in circulation or more public debt issued in order to keep the wheels turning. Without either of these and it's game over.



Paul Bogdanich's picture

The chart numbers are deceptive.  In that presentation nuclear weapons research and maintenance expenses are under discretionary costed to the DOE when they should be under defense and the VA is under other manditory instead of defense as are the supplementals for the wars.  Like most of these charts do everything they can to minimize the cash cost of the defense portion of the budget.  In my estimation Homeland Security should also be under "defense" instead of other manditory but at least properly classifying the others would be a start.  Defense was by far the largtest item in the 2010 budget not one of three equally sized portions like that graph makes it appear.   

RockyRacoon's picture

OK.  Put everything where it belongs.  Does the outcome look any better?

U. S. A.   R. I. P.

Paul Bogdanich's picture

You say U.S.A.  R.I.P.


If you mean USA the Imperial Power then you are correct.  Were it not for what we have spent since 1964 on the military the budget deficit would be about 5% of its current size.  That's another analysis that is seldom if ever presented.  If one tracks debt owed to the public and defense expenses they roughly track each other over the last 40 years.  Anyway unless and until one decides to disolve the Empire there is no way to balance the budget which is the problem here.  The choice is go big or go home and a lot of people would rather go big than give up on the idea that we dominate the World and everything in it.  This would mean more wars where we behave more brashly, drop the democracy bullshit and make the conquered territories pay for what it cost to conquer and occupy them by outright stealing their resources and starving the surplus population.  Kind of like what the Israelis do with the Palestinians.  That's the current danger and I see no reason to believe that our current "leaders" won't go down that path.  They will of course need an excuse to change the political climate and make people forget all this human rights clap trap but this population is dumb enough and bloodthirsty enough where that should not be too much of a problem. 




pauldia's picture

Obama’s dozens of Social Security Numbers BY COACH COLLINS, ON APRIL 10TH, 2011

 By Suzanne Eovaldi, staff writer

 Discrepancies in Barack Obama’s history “that raise serious questions about his eligibility for the office of President” have been accepted “quietly” for study by the U.S, Supreme Court, according to an Email this web site received just this week.  

 The memo which goes on to refer to “possible fraudulent use of a Social Security number in Connecticut, while Obama was a high school student in Hawaii,” is quite similar to an investigation posted on May 16, 2010.

According to a search done by former British police detective Neil Sankey, now a U.S. citizen and a licensed private investigator in Los Angeles, Barack Obama reportedly has 27 different social security numbers under 21 different personal and/or familial name variations in 22 different states plus the District of Columbia.

 Along with PI Susan Daniels, Sankey generated a large social security public data base in his lengthy research project, titled “List of Properties associated with Barack Obama and his family.”  Sankey’s research is featured in a web video entitled Dossier2MP4 produced by Jim Przybowski.  The Sankey/Daniels social security investigation segment alleges Obama currently is using a Social Security number assigned to someone born in Connecticut in l890!

N.B. There is no indication that the Social Security Administration re-issues numbers upon the death of a number holder no matter how long ago they were originally issued.  

   Sankey and Daniels report that Social Security numbers connected to Barack Obama and the addresses they trace to are as follows:  363 Notlem St., 34982-7358 Fort Pierce, FL.  A Social Security number beginning with zero is connected to “White House, Irvine, CA.”   A number starting with 282 connects to “713 Hart Senate, D.C,”   There was one connected to “White House, Baltimore, MD.”    Six more Social Security numbers beginning in the 400s show up with addresses in Washington, Colorado, Georgia, New Jersey, Tennessee and Maryland.

 Another five beginning with 500 connect to more cities in California, Washington, Maryland, and Georgia.  Two starting with 600, trace to Florida and Texas.  Of the three numbers beginning in the 700s, one is listed as “Pennsylvania Ave., Washington, Utah.”

 Still more. . .. Three 900s connect to addresses in California and Utah postal box numbers.  Fifteen Social Security numbers connect to addresses in Illinois.  The same number appears twice for addresses in Sommerville, Massachusetts.  One goes to 300 Massachusetts Ave., N.W. Washington, D.C.; the other traces to a postal box in Chicago.

  Two odd entries have this same number, but no street address is mentioned.  Three different social security numbers for the spelling “Barak” Obama appear in addresses on Happy Street in Covington, Washington, on Digital Highway, and Video Drive in Los Angeles, CA.

  In the U.K.’s DAILY MAIL, a news story by David Jones, 27th November 2009, said Neil Sankey is trying to prove that “Barack Obama is guilty of the most audacious act of fraud in the U.S. political history, having become President when he was not eligible to run for office.”   “Sankey is a former detective sergeant who served Hampshire police for 26 years and left with an exemplary record,” continues the DAILY MAIL story.  “As a highly regarded young detective, Neil Sankey was once seconded to elite Scotland Yard units hunting down IRA bombers, dangerous anarchists, and organized crime barons,” the reporter says.

  Several calls made to Sankey’s CA office were not returned.  His data base could not be downloaded and apparently is protected research.

No copyright statement was attached to the many, many pages of Sankey’s painstaking research which I analyzed by collating his on-screen names and figures. 

 To contact your Congressional Representative use this link:

 To read more use this link

 This day in history April 10

 1947: Republican activist Branch Rickey of the Brooklyn Dodgers signs African American baseball player Jackie Robinson to play for his team and become the first African American to play Major League Baseball.
If you are not receiving directly, please signup using the RSS feature on   the home page. It’s easy and always free.

In this world you may have knowledge or you may have repose, but you may not have both. 

 Remember we have work to do. Join your local TEA party and Republican County   Committees to make sure real conservatives get our nominations.

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blunderdog's picture

Fraudulent SSNs?  Jeez, you idiot, it's worse that than!  He's a demonic space-alien communist!

Pool Shark's picture


Like I said,

Congress is merely rearranging deckchairs on the Titanic.

"Nearer my God to thee..."


joshbot's picture

Appeal to ridicule, also called appeal to mockerythe Horse Laugh, or reductio ad ridiculum (Latin: "reduction to the ridiculous"), is a logical fallacy which presents the opponent's argument in a way that appears ridiculous, often to the extent of creating a straw man of the actual argument, rather than addressing the argument itself.

blunderdog's picture

Yes, joshbot, very good.  My post was RIDICULE.

However, the post I was replying to was not an argument.  It was a CLAIM.

For your next lesson, learn to distinguish between arguments and claims.

BigJim's picture

It's not Obama's past that's the problem.

Dr. Porkchop's picture

Speaking of spending in the 60s. I'm right in the middle of watching a NOVA doc on Astrospies.. the plan to put an orbiting manned spy station in space. It was going to cost over a billion and a half dollars...that was a lot of money then!!

The MOL program was cancelled before the moon landing. The Russian's ALMAZ capsule was launched into space. They were able to photograph targets, develop the film, and transmit via video camera back to ground control. The thing even had a 20mm cannon on it because they had intelligence the Americans wanted to develop capability to attack enemy sattelites.


The Russians successfully operated a manned spy station, but they came to the same conclusion that the Americans did, that it was too complicated to run and fund manned spy stations.

rack's picture

Funny you say that I wonder if they rolled out trump last week to plant into the public psyche the oil grab

Dugald's picture

Oh heck! another "Pax Romana"......

Mr Lennon Hendrix's picture

America died when Tricky Dick took the dollar off the gold standard.  Oh, woops, was I not supposed to call him that?  Just wondering, because people get so upset when I call the current Emperor "Barry".

Buckaroo Banzai's picture

Well, actually America became mortally ill in 1913 when the Federal Reserve was created, and the 16th amendment was passed. Then FDR shot America in the head in 1933, LBJ jpushed America down an elevator shaft in 1965, and Tricky Dick hanged America in 1971.

stirners_ghost's picture

You're a hundred-some years too generous. The recipe for this shit-cake was penned way back in 1787-- Article I, Section VIII. The Fed (indirectly) stakes its claim to legitimacy (Spook of Spooks and lord of plebes) thereupon.

TheMerryPrankster's picture

Barry prefers to be called "corporate tool". its more hopey.

bonddude's picture


The man who helped crash IndyMac, Sonoma Valley Bank and several others engages in 

insurance fraud too. Iranian lightening. A half ass bust out on his Reno casino to condo

conversion failed. the place didn't burn all the way. The film listed under Reno Sundowner on

Youtube. But first a happy cartoon about such activity.

Selah's picture

Default, Bitches...

How many charts and words do you need?


Sudden Debt's picture


They can explain it any way they want. The US spends twice as much as it should.

Cut 50% off everything. And do this untill the debt is down to 20% of GDP.

The longuer they wait, the more they lose from interest payments and the harder budget cuts will be.

Popo's picture

Oh, there you go with that "logic" thing again.   How about we just keep on spending like there's no tomorrow (It's easier on the political class, that way).  And when inflation rips every senior citizen a new assh*le we'll deny, deny, deny or we'll call it an Act of God and throw up our hands to the monetary collapse which no one could have seen coming.

Besides... you "logical" / "responsible" types are always coming up with solutions that career-stoppers for anyone in politics.   Why on Earth would anyone ever make a 'hard call'?   We can't even reduce the deficit by a fraction of a percent, let alone reduce spending in any meaningful way.  Please sit back, relax, stop worrying and get a bowl of popcorn: The world as you know it is going to implode, and inflation is going to eat your civilization alive.  

Please enjoy the show.






Great Unwashed's picture

Tsk. That obviously must never happen because then some very important people would lose money, not to mention the fact that some very important people would not get reelected. Find another way.

TheMerryPrankster's picture

How do you default when you own the default currency and that is backed up by thin air? the Bernank don't even need ink, he just moves a few electrons around and Blam. a billion dollars. Its magic.

Manthong's picture

Just asking.. How long has "Social Insurance Tax" been an item on the revenue side?

I thought they just stole, I mean borrowed it from the Social Security Administration.

Pepe's picture

If we were Icelanders we may make it...

Troy Ounce's picture

BBC: No vote appears ahead in Iceland Referendum.



NumberNone's picture

Icelanders again reject shackling children with debt of banksters fraud...rumor is that carriers are moving away from coast of Lybia and heading north. 

High Plains Drifter's picture

they always call it defense spending. what does military spending have to do with defense?  they should call it military offense spending. i can tell you one thing. almost nobody cares about this stuff. nobody. they don't want to know either.

bonin006's picture

Before 1947 it was the honestly named Department of War

From 1947 to 1949 it was the somewhat less agressive but still more or less honestly named "National Military Establishment".

Honesty went out of style in 1949, and they changed it to the Department of Defense








RichardP's picture

The National War College in Washington, D.C. still exists.

jplotinus's picture

The years 1947-49 incorporate an epochal turning point; namely, election night, November, 1948.  Recall that on that night what we now call "mainstream" "corporate" media proclaimed 'DEWEY WINS'.

That is probably the last time a mistake on that order of magnitude was made.  From then on, whoever corporate media declared the winner, was the winner.  Could it be that democracy was still viable at least up through 1948?  Note, I am not here saying there was any vast difference between Truman and Dewey, but I am saying that it appears the 1948 election was decided on the basis of a vote count, rather than a military-industrial-complex fix.

Recall, too, that by January, 1961, we were warned by Eisenhower that the MIC had, by then, done us in.

Urban Redneck's picture

The Department of War was able to win Wars.  Consolidation of the Services within the Department of Defense and the Pentagon seems to have rendered the US incapable of winning a War, though capacity for achieving a decisive victory in Battle remains intact.  Another example of winning the battle, losing the war  Group-think is easier when everyone involved is "just down the hall".   

BigJim's picture

Piffle. We beat Grenada, didn't we?

Amish Hacker's picture

Orwell's 1984 published June 8, 1949. Newspeak is born! Not coincidentally, the Department of War becomes the Dept. of Defense. Here's how the story begins:

"It was a bright cold day in April, and the clocks were striking thirteen..."

Jim in MN's picture

Doesn't everyone defend their house by leaving rabid dogs in all the neighbors' lawns? 

It really is...well, seems...through myopic and sociopathic glasses....safer.

Especially when all the pit bull chow money is borrowed.  From the neighbors.

reader2010's picture

Run the beast to the ground. Let the NWO begin now.

Crisismode's picture

As the $US continues to swirl down the toilet bowl at an ever-increasing rate of speed, we must all now pause and re-examine where we personally are in this ever-unbelievable scenario.

How many of us are simply hedged against the next day's market move, and how many of us are truly hedged against the coming shutdown of normalcy in day-to-day life?

Methinks that many of the commenters here on the forum think that simply having a couple hundred ounces of gold and a few thousand ounces of silver are all that is needed to tide them over the coming events.

Hmmm, I'm thinking they are a tad short-sighted.

I'm a firm believer in honing and practicing those humble daily-living skills now, while there is a chance to do so, and learning the lessons from that exercise. That will be far more rewarding in the future than simply possessing piles of metal coins.

Manthong's picture

I believe in a 50/50 allocation of resources for NWO survival (SW500/M82A1).

Incubus's picture

Humble?  I'm a person of few "luxuries."  People who know me occasionally joke that I could be a religious ascetic.  My "satisfaction" comes from knowing I have the will to resist the garbage of everyday life—or what passes for 'life' in modern-day western society. 

When a collapse does happen, I'll be able to handle it, because I'm wired that way.  Hedonism was never really my thing, so I won't miss it much.  

Yardfarmer's picture

a hundred ounces of Au? a couple thousand of Ag? bwahahahahahahahahahaha!! 

chistletoe's picture

The main drawback in owning a lot of gold and silver

is the same that it has always been.

The ancient Egyptians found out when they met the Romans.

The Mayans and Incas found out when they met the Spanish.

Gold and silver have very strong magnetic properties.  They attract

lead, particularly the highly-accelerated isotopes.


But guns, too, have always proved themselves to be useless in the end.

Every time one man is killed, you have made ten permanent enemies.

Inevitably, soner or later, they will come up with a bigger gun than you.


Of all the assets a person might invest in and own,

his own good name, his ingenuity, skills and hard work,

and the well-being of his friends and neighbors,

have shown themselves throughout history to be the most valuable and long-lasting.

But that lesson seems to be just as lost on many of the readers here

as it is in the halls of The Capitol, The Executive Office Buildings, nd Eccles ...


we are in for a cleansing of historic proportions,

and most of the people who believe they will be spared,

won't be.

European American's picture

Oddly enough, I'm actually looking forward to the "Phase Transition". It's long over due and time to settle things once and for all. Once the dust clears, I suspect, life will resort to nourishing itself in a simpler, softer kind of way. But before we reach Absolute Zero, the Entropy will literally shake us at our core. What a show it will be.

I often look at the various designs on my gold and silver coins and wonder what those forms will look like in a 100 years.

rich_wicks's picture

If you're a Jain, you might have to drop some of your beliefs to simply survive in the next few years.

Lord Koos's picture

Maybe not -- Jains have been around for about 2600 years.