The United States Must Cap Spending at

18% of Gross Domestic Product

To Avoid Bankruptcy

Federal Debt

1940

1942

1944

1946

1948

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

esti

mat

e20

13 e

stim

ate

2015

esti

mat

e

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Gro

ss F

eder

al D

ebt (

mill

ions

)

In 2011 we hit 15 trillion dollars in debt.

In three years that number will be 20 trillion.

Source: CBO Historical Table 1.7

Federal Revenue

• Over the past 81 years, the American people have shown that they tolerate an average of 15.9% of GDP being collected as Federal revenue

• Since the end of World War II that number has increased to 17.7% of GDP

• 2009 Federal revenue was 15% of GDP

Federal Revenue as % of GDP

19301933

19361939

19421945

19481951

19541957

19601963

19661969

19721975

19771980

19831986

19891992

19951998

20012004

20072010

0

5

10

15

20

25

% o

f GD

P 15.9%, the historical average

17.7%, average since the end of WWII

Source: CBO Historical Table 1.2

Federal Spending

• Since the end of World War II the Federal government has spent more than the average revenue collected; an average of 19% of GDP

• Since the end of World War II that number has increased to 20% of GDP

• 2011 Federal Spending was 24% of GDP

19301933

19361939

19421945

19481951

19541957

19601963

19661969

19721975

19771980

19831986

19891992

19951998

20012004

20072010

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

% o

f GD

P

Federal Spending as % of GDP

Source: CBO Historical Table 1.2

19%, the historical average

20%, average since the end of WWII

Ever Present Deficits

• In the past 81 years we have had 66 deficits and had only 13 surpluses

• This is why our debt is as high as it is today: currently over 15 trillion dollars

Federal Spending and Revenues as % of GDP

Source: CBO Historical Table 1.2

19301933

19361939

19421945

19481951

19541957

19601963

19661969

19721975

19771980

19831986

19891992

19951998

20012004

20072010

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Revenue Spending

% o

f GD

P

Where the black shows through the red there was a surplus, otherwise there was a deficit

Deficit

Surplus

Paying the Interest on the Debt• Just like when an individual or business

borrows money, the Federal government has to pay interest on its borrowed funds

• The annual interest rate paid on the Federal debt is reflected by the interest rate of US Treasury Bonds

• Currently we pay about 2% - historically we have paid an average of 4.9%

Will We Go Bankrupt?• In just over 3 years, our debt will reach 20 trillion dollars. If the

composite interest rate on that debt goes up just 1 percentage point, we will pay 600 billion dollars a year in interest - that is 3 times what we paid in 2011

• We cannot pay that amount without cutting 400 billion dollars from the budget – something Congress has never come close to doing

• See the next two slides – the 2012 White House Budget numbers show in 2015 an expected interest rate of 4 to 5 percent and an expected debt of just under 20 Trillion dollars.

• We will not declare bankruptcy – instead, the Federal Reserve will pump all the money we need into the main money supply – this is called a “Fed Default” – and we will have DOUBLE DIGIT INFLATION

White House 2012 Budgethttp://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/tables.pdf, page 202

White House Budget 2012http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/tables.pdf, page 203

Double Digit Inflation is Worse Than a National Sales Tax

• High inflation, as high as 20%, raises the cost on EVERYTHING – No product or service is excluded.

• High inflation raises the cost on EVERYONE – No one is exempt – the poor and middle class are hurt the most

• People with assets benefit because their assets increase in value – the rich get richer faster and the poor suffer more

• Each year the inflation compounds – just like an additional annual sales tax

• In a period of just a few years, the value of the dollar will be cut in half

• The misery index (unemployment + inflation) of the 1970s will return - with a vengeance

Avoiding Double Digit Inflation• The Federal Reserve will only trigger inflation if we

cannot pay our interest on our debt – so let’s not get to that point!

• Raising tax rates will not help because no matter what tax rates have been (they have been as high as 90%), tax revenue has been an average of 18% of GDP

• Congress must cap spending at that number, 18% of GDP, and send a clear message to the world that we FINALLY intend to manage our checkbook responsibly – this should help keep the interest rate on our debt low

What You Can Do

• Use the Bubble view of the current federal budget on this site to create your own “18%” budget - then share it with others and show them how “doable” it is

• Support the TASC (Term and Spending Cap) Amendment – “Spend over 18% and your time in Congress is spent!”

Term and Spending Cap (TASC)Amendment

“Congressional members presiding over a fiscal year with a Federal

Spending to Gross Domestic Product ratio of over eighteen

percent are denied another term. “

TASC Amendment• The average annual Federal revenue collected since WWII was

18% of GDP, regardless of how high or low the tax rates were.  Spending at a rate higher than this, except for times of great national peril, is irresponsible.

• In a time of great national peril, like war, when more than 18% must be spent, congressional members need only forfeit their next term. Patriots serving in Congress will gladly pay this cost. 

• Revenue collected over the 18% will be applied to the national debt.  Once the national debt is paid, overages will be refunded to the taxpayers.

• Once Federal spending is capped, wealthier taxpayers will have fewer objections to paying higher tax rates 

• We will never end the corrupt cronyism in the Federal Government but we can LIMIT it. The Balanced Budget Amendment does not LIMIT spending – it only LIMITS deficits.

• The Balanced Budget Amendment restricts our ability to react to major security or economic threats. TASC allows for ABSOLUTELY NECESSARY overspending – members of congress simply must surrender their next term.

TASC Amendment

TASC Amendment

Congress will never pass an amendment policing themselves so we will have to call for a Constitutional Convention to pass the amendment, independent of Congress. We will need 2/3 of the states to call for the Convention and then 3/4 of the states to ratify the amendment.  We need at least 10,000 people in each state to rally at their state capital to persuade state legislatures to call for the convention.

TaSC Amendment• Please help support the passage of this amendment by

purchasing your TASC Amendment Flag.  This beautiful flag is made by Annin, the oldest flag manufacturer in the U.S., and sold independently by Flag World (www.aflagworld.com). Bring it with you when you are called to show your support in person at the TASC Amendment rally in your state capital.

• This web site will track how many flags have been sold in each state.  As each state reaches the 10,000 mark we will call for the TASC Amendment rally at that state's capital.

• Now you can finally do SOMETHING about our irresponsible Congress.  Will you?

TaSC Amendment – Talking Points• Limiting spending is the only way to avoid the coming Federal Reserve default (as early as 2015) and

the resulting multi-year double-digit inflation that will result.

• Congress clearly demonstrated in 2011 that they are incapable of limiting spending.

• This is a non-partisan issue. From the left’s perspective, a bankrupt government loses its power to do ANY good, and from the right’s perspective a government SHOULD limit their spending to only what they take in.

• The amendment avoids the debate on revenue and taxes. Regardless of what group has been the target of a tax or loophole, and how high or low the tax rates have been (they have been as high as 90%), the American people have demonstrated they are only willing to pay 17.7% of Gross Domestic Product. It is healthy to debate the most efficient and fairest way to collect that revenue, but childish to assume that MORE can be reliably collected.

• Most money spent by the Federal government is done wisely, but much of it is not, especially on political crusades and wars. If Congress feels that a situation is SO CRITICAL TO THE COUNTRY that overspending is required, they should feel the pain as much as the rest of us. The TaSC amendment will finally make waging expensive, superfluous, wars costly to the members of congress and not to just the brave soldiers that fight them.

• As the largest economy in the world, it is our duty to lead the rest of the world out of the immoral monetary policies of the last generation – the conjuring of wealth instead of the creation of wealth. The U.S. must send a clear message to the rest of the planet that the people of the U.S. have directed their government to live within their means and that we , the people, will create wealth, not print money.

• A nation that cannot properly work a checkbook does not deserve to be world leader.

Summary

If we do not cap Federal spending at the historical level of Federal revenue, by 2015 we may find ourselves unable to pay the interest on the Federal debt. The Federal Default and inflation that will ensue will hurt the people without assets: the poor and middle class. There is a way to avoid this calamity. Please support the TaSC Amendment.