Understanding Our Oil-Related Fiscal Cliff

The United States’ fiscal cliff is very much related to several changes we have been going through recently, and will likely continue to experience:

  1. High oil prices (more than triple their level ten years ago). High oil prices cause people to cut back on discretionary spending, leading to layoffs in discretionary industries and debt defaults. Governments get less revenue in taxes at the same time they need to increase spending for unemployment benefits, bailing out banks, and stimulus funds. Result: financial problems for governments of oil importing countries, including many Eurozone countries and the United States.
  2. More free trade with Asian countries starting about 2001, when China joined the World Trade Organization. This change sent many jobs to Asia, and also holds down wages in US industries that compete with companies using overseas labor.
  3. Lots of baby boomers becoming eligible for Medicare and Social Security, starting about 2011. This is a problem because taxes, in practice, need to cover the cost of  benefits on a cash flow basis, which is the way US handles its financial accounting. As a practical matter, this is the way the world economy works as well–the goods and services used today are created by today’s workers, with resources pulled out of the ground today. Carryovers in terms of goods are very limited–mostly a little grain.
  4. A health care industry that is able to charge fees that are increasingly out of line with the wages of common workers.

None of these issues looks likely to improve in the near future, suggesting that we are encountering a long-term problem that is only likely to get worse.

In this post, I provide charts showing that if the US funding problem is fixed through higher taxes on individuals (including proprietors), the needed fix would require additional taxes averaging approximately 15% of each person’s wages. If oil production remains relatively flat, as it has since 2005, additional tax increases even above this level will likely be needed later, as higher oil prices lead to more layoffs, and more need for government spending.

I also discuss three approaches other than higher taxes on individuals that might be used to try to fix the problem:

  1. Send programs back to the states
  2. Fix health care costs by emulating the Japanese using severe caps on medical charges
  3. Rethink taxes on imports

The first approach is being considered by others. I see drawbacks to it that others may have overlooked. The second two approaches are admittedly nonstandard, but need to be at least considered.

I am not very optimistic that a way can be found around the fiscal cliff. The problems are too much “baked into the cake”. But if we don’t understand what the magnitude of the problem is, and what is causing it, it is hard to make good decisions.

The Magnitude of the Problem

The “standard” way of looking at government income and expense is as a percentage of GDP. As a practical matter, though, about 80% of federal taxes relate to individuals, so it makes more sense to me to use a wage base for comparison, especially if there is concern that wages aren’t keeping up with GDP.

Also, while the issue at hand is federal taxes, from a taxpayer point of view the real issue is total taxes–Federal, State, and Local, including Social Security and miscellaneous taxes. If we compare total government expenditures to estimated taxpayer wages1, we see that in calendar years 2009 through 2011, expenditures exceeded 65% of wages (Figure 1). Total government receipts have averaged around 50% of wages, currently slightly less than this benchmark.

Figure 1. Government expenditure and expenses for all levels of US government combined (including federal, state, and local and Social Security), based on Table 3.1 of the Bureau of Economic Analysis. See Note 1 for definition of wage base used.

Based on Figure 1, we either need to raise taxes by a little more than 15% of wages, and keep raising taxes in the future to keep up with an escalating problem, or we need to cut back on government benefits, such as unemployment insurance, Social Security and Medicare.

Either of these actions can be expected to have a very adverse impact on the economy. If citizens need to pay much higher taxes, they will cut back on discretionary spending. Such a cutback is likely to lead to more layoffs in discretionary sectors, and more recession. If benefits are reduced, those directly affected will be very unhappy. There may even be civil disorder. In addition, those with reduced benefits are likely to cut back on their spending, leading to recession. They may also default on loans, leading to bank problems.

Of course, the Fiscal Cliff discussions are about fixing only a little bit of the problem now, and making plans to fix small amounts in the future. The real issue, if we understand the four problems listed at the beginning of this post, is that we are facing an escalating problem. This is especially the case if world oil supply remains relatively flat, as it has been since 2005.

Breakdown of the Deficit

Figure 1, shown above, showed a combination of Federal, State, and Local government income and outgo (including Social Security, Medicare, etc.) as compiled by the US Bureau of Economic Analysis. Figure 2, below, shows the corresponding figures for State and Local Governments.

Figure 2. State and Local Government Revenue and Expenditures based on Table 3.3 of the Bureau of Economic Analysis, expressed as a percentage of the same wage base as described in Note 1.

A person can see from Figure 2 that Income and Outgo are fairly well in balance for State and Local Governments, but there is a problem with both taxes and benefits rising over the long term. This contributes to the long-term unhappiness citizens feel about taxes in general, even if the problem is not federal taxes.

While it may seem surprising, the Federal deficit discussions relate to all government spending other than State and Local government.2 Thus, besides regular budgeted spending, the Fiscal Cliff discussions consider Social Security, Medicare, the Federal Government’s portion of Unemployment Insurance, and un-budgeted military expense. If the Federal Government should become obligated in the future to bail out government organizations, such as the Pension Benefit Guaranty Corporation or the Federal Deposit Insurance Corporation, these costs would presumably need to be considered as well in determining whether there is a balance of income and outgo.

Probably of the biggest areas of funding shortfall is Medicare (Figure 3, below).

Figure 3. Medicare Revenue and Expenditures by Fiscal Year, based on Tables 2.4 and 11.2 of the Historical Data of the White House Office of Management and Budget.

Medicare, besides providing health care for those ages 65 and over, also provides coverage for some disabled workers. The program has always needed supplemental funding, but the amount of the deficit has become greater in recent years, and is forecast to get even worse in the future. (On all of the charts, the forecasts I show are those provided in the White House Office of Management and Budget reports.)

Social Security is better funded, or was, until a decision was made to cut employee contributions by 2% of wages, for calendar years 2011 and 2012. This was done as an off-budget stimulus to the economy.

Figure 4. Social Security receipts and outlays, based on Tables 2.4 and 4.1 of the Historical Tables of the White House Office of Management and Budget.

The current plan seems to be to return to the original tax rate effective January 1, 2013. This return to the original tax rate does not seem to be reflected in the White House Office of Management and Budget (OMB) figures I am showing in Figure 4. Even if this change is made, it is my understanding that there is still some need to raise Social Security taxes.

Another grouping on budget reports which has some revenue associated with it is Income Security, shown as a functional category on OMB report 11.2. This grouping seems to include the federal portion of unemployment compensation. It probably also includes Food Stamps. It too shows a shortfall.

Figure 5. Federal Income Security receipts and outlays from Tables 2.4 and 11.2 of the Historical Data of the White House Office of Management and the Budget.

If it were somehow possible to erase the problems with these three programs (Medicare, Social Security, and Income Security), there would still be a federal revenue shortfall, but a manageable one. In several periods, there has been a surplus on this basis (Figure 6).

Figure 6. Comparison of Receipts and DIsbursements for Federal Programs excluding Medicare, Social Security, and Income Security, based on Historical Data of the White House Office of Management and Budget.

We can break down the remaining federal spending (as shown in Figure 6) into some major groupings.

Figure 7. Allocation of Federal Spending, other than that for Medicare, Social Security, and Income Security, based Historical Data of the White House Office of Management and Budget.

Health, at the bottom of Figure 7, would seem to include federal funding related to state Medicaid programs. The bulge for future years reflects the new federal healthcare program. Defense, shown in red, is very large in recent years, but is forecast to shrink in the budget forecasts of the OMB.

Net interest is reflects a netting out of interest paid and received. This is a different accounting treatment that a person sometimes sees, with Social Security being credited with some portion of interest payments. Here, all interest is in one location. Recent interest payments have been very low, thanks to the artificially low interest rates now in effect. Interest payments are forecast to more than double by 2016.

Figure 7 shows that the “All Other” category is quite small, compared to the $1 billion+ in deficit that we are facing on an ongoing basis, if funding stays as in the recent past. This would correspond roughly to federal government programs where the expenses are mostly salaries of government employees, rather than transfer payments to citizens. I calculated this amount by subtraction of the selected pieces from the total.

Federal Revenues and Outlays Compared to the Selected Wage Base

If we use the same wage base as with Figures 1 and 2, the ratios of income and disbursements to wages are as shown on Figure 8 below.

Figure 8. Federal Government Revenue and Expense (including Medicare, Social Security, etc.) as percentage of Wage Base described in Note 1.

The current high outgo doesn’t look as high relative to prior years, as it does in Figure 1, but looks can be deceiving. Figure 2 near the beginning of the post shows that state and local taxes have been increasing–from roughly 20% of wages in the late 1970s to 25% (or more) now. So total taxes “feel higher,” even if the federal part doesn’t rise by much. The federal government has paid for some of this rise in state programs, through federal funding of local programs. The temptation now will be to cut back on federal funding.

If there is a goal to keep total state and local taxes to less than 50% of the wage base, then it would make sense to get federal spending down to 30% of wages, or below 30%, if there is a cutback in federal funding of state programs. If federal payments look to be headed for 45% of wages, this would mean that federal spending for all programs combined would need to be cut back by one-third (=(45%-30%)/ 45%).  Alternatively, of course, taxes can be raised–but with the caveat that taxpayers get very unhappy about taxes over a certain level.

If we look at individual programs “stacked up” as a percentage of wages, this is what we see:

Figure 9. Federal spending as a percentage of wages, broken out by category, in stacked chart. Spending based on White House OMB data; wages as described in Note 1.

The biggest run-away program is Medicare. It will be difficult to fix it without making a lot of people unhappy. Defense can be cut back even more than it has been, but that leaves a lot of unemployed military people as well as unemployed people who work in defense industries.

Other Ways to Fixing Funding  Besides Higher Taxes

Send programs back to states. Perhaps the easiest way for the Federal Government to reduce spending is to turn programs over to the states, offering some sort of small “block grant” to fund them. Then, if the program is unsatisfactory, it is the problem of the state, not the federal government. Richer states will be able to provide better programs than poorer states. The federal government’s role will gradually be reduced.

The downside of this approach is that programs are likely to be greatly reduced in scope. The federal government will become less and less important in the whole scheme of things.

I have written about the tendency of countries with financial problems to break into smaller pieces, as with the possibility of Catalonia seceding from Spain. The problem with reducing the government’s role is that it tends to push a country more in this direction. The view may become, “If the individual states are doing everything, who needs the expensive federal government, with all of its debt?”

Fix Health Care Costs. US healthcare has been on its own track for a long time. It is far more expensive than the systems of other developed countries, and the quality of results is not very good, according to studies such as this one by Commonwealth Fund.

Figure 10. International Comparison of Healthcare Spending, from Explaining High Health Care Spending in the United States: An International Comparison of Supply, Utilization, Prices, and Quality, by David A. Squires, The Commonwealth Fund, May 2012.

The high cost of the Medicare program and the high anticipated cost of the new healthcare program for the uninsured are both related to this issue. David Squires, author of the study linked above, points out that Japan has a health care system that shares similar features to the US system: it is a fee for service system with unrestricted access to specialists and hospitals. Yet its cost is near the bottom of the chart, and Japanese have the longest life expectancy in the world. The major difference in the Japanese health care model is that the Japanese government aggressively regulates health care prices. The report indicates that if the US were to spend the same share of GDP on healthcare as Japan, the saving would amount to $1.25 trillion. This would be enough to pay for our annual spending deficit, if it could be channeled in that direction. (Of course, it can’t, but it would help.)

Perhaps a change closer to the Japanese system of regulation could be coupled with more emphasis on healthy eating and exercise. The major losers in such a change would be surgeons and other specialists earning very high salaries, investors in very high-priced devices, pharmaceutical companies who charge US customers more than elsewhere, and hospitals that need to scale back services to be more in line with what other developed countries provide.

Rethink Foreign Imports. Economists have told us globalization is the only solution. Yet, we cannot compete on a level footing with countries with very low labor costs, especially if their primary fuel is (cheap) coal. We find that we have more and more laid-off workers, at the same time their economies are growing rapidly. (I describe this more in  this post.)

It seems likely that over the long-term, globalization is going to shrink, as the cost of importing goods increases, and as financial problems of countries increasingly get in the way of signing longer-term contracts. (Who wants to sign a contract to make products for a country whose currency may radically drop in value before the goods are produced?)

A partial solution might be to penalize companies that outsource jobs to parts of the world with lower wages (but this would be hard to enforce, and likely run afoul of free trade agreements). It would theoretically be possible to re-impose tariffs on selected categories of imported goods and services, to try to encourage more local hiring, even if it means higher production costs. Again, this has free trade agreement issues.

A  related issue is the idea of businesses being able to incorporate offshore, and escape US taxation. I know my work as an insurance actuary involved a lot of work for “offshore captives“. Somehow, we should be rethinking whether allowing US companies to take the benefit of these offshore services, without tax, inside the United States, is in the United States’ best interests. Shouldn’t we be taxing goods and services produced elsewhere, to avoid US taxation?

Other Issues

There are many other issues that deserve a more complete treatment, including further discussion of the four causes of the increasing deficit at the beginning of this post. I have treated some parts of these issues in other posts, such as High Price Fuel Syndrome.

Notes:

[1] Wages used as a base consists of “Wages and Salary Disbursements” for both employees in government and in private industry, plus “Employer Contributions for Government Social Insurance” plus “Proprietors Income” relating to both “farm” and “non-farm”. All of these amounts are from Table 2.1, Personal Income and Its Disposition. For most people, this will be the nominal wages a person receives (before deductions of any kind), plus the amount paid by the employer on behalf of the employee for Social Security and Medicare contributions. I have not included “Transfer Payments” such as Social Security, Medicare, Medicaid, and Unemployment Insurance, since these are likely not to be heavily taxed. For projecting future years wages, I have assumed 3% annual growth (1% increase in labor force and 2% inflation). If there is recession or if the number of jobs fails to rise, this assumption may prove to be too high.

[2] There is a small overlap between federal and state programs. For example, the Federal Government gives State and Local Governments to spend on unemployment benefits, and on Medicaid, and on stimulus projects. The data sources I am using should remove these overlaps correctly.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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157 Responses to Understanding Our Oil-Related Fiscal Cliff

  1. Don Stewart says:

    Seeing no ‘reply’ line, I will quote from one of Gail’s responses and then give my response:

    ‘We can in our own humble way attempt to produce a different ecosystem that will produce more edible food on a given area. I would argue that it takes a lot more than knowledge. About all we can do without fossil based tools is dig with a stick, and perhaps in some places stick a seed in the ground. Water is a huge issue as is not degrading the soil. There is also a question of how much of the yield we as humans are able to keep, as opposed to giving it to other competitors (insects, animals, crop diseases). Without fossil fuels, our share becomes much less.’

    Fortunately, there is research and development about all these issues. For example, in the current issue of Permaculture Activist you can find Peter Bane’s review of Martin Crawford’s book How To Grow Perennial Vegetables. A few quotes:

    ‘Martin Crawford has gone farther down the path toward a permanent agriculture than virtually anyone working in the temperate zone of the world. That he has done so systematically, both trialing plants and reporting his findings to the world, is a boon for all permaculture designers.

    The advantages of perennials are many, the disadvantages real enough but few. Tillage is a tremendous contributor to the oxidation of humus and the buildup of carbon dioxide in the atmosphere, a major driver of catastrophic climate change. Whatever we can do to reduce this is worth considering. Soil fertility is more easily built in non-tillage systems but weed management, while not more onerous overall, requires different approaches. Placement and the relationship of neighboring plants over time must also be more carefully considered than in settings where everything is wiped away with the onset of cold weather. Crawford addresses all these issues.’

    In short, industrial agriculture (both plants and animals) has been enormously destructive. But there are people in the world who know how to do it all better. While it is OK to examine the destructive methods, it is more productive to consider ‘best practices’. Tad Patzek might consider a trip to England and a meeting with Martin Crawford.

    Perennials require us to dig with a stick just once. And they are far more resilient to both drought and flood. We’d still be smart to use our remaining fossil fuels to do water landscaping, but such landscaping lasts centuries. And societies have landscaped with human and animal labor. The informed placement of plants in relationship to each other can maximize the yield that humans get as opposed to the random scatter which may occur in Nature.

    Again, I hasten to add that a partnership between Mother Nature and humanity isn’t guaranteed to feed an unlimited number of mouths. But, as I observed earlier, Big Food is doing its best to take care of the number of mouths problem.

    Don Stewart

    • If climate would “stand still” for a while longer, it would help in knowing what crops to plant. I agree, though, that perennials have huge advantages. The big disadvantage with perennial grains is lower yield. I would expect that this would be the case for perennial vegetables as well, because these plants have less need to reproduce themselves.

  2. Don Stewart says:

    Gail
    I highly recommend that you spend 14 minutes with Martin Crawford in his food forest in England:

    Notice a few things in particular:
    1. Feed 4 or 5 people per acre
    2. Low maintenance
    3. Drought resistant
    4. Mobile nutrients thanks to fungi
    5. Hundreds of edible plant species (are we as smart as orangutangs?)
    6. Carbon sequestration
    7. Mostly, but not entirely, perennials
    8. Stacking leads to efficient harvesting of solar energy

    Don Stewart

    • Thanks! I agree that what the movie shows is probably the “way to go”. It seems like an individual solution is probably needed for every piece of land, depending on soil and water conditions. Learning to do this will not be easy, and there is a time lag in getting the new forest garden “up and running”. All of these things make it hard to put these in in many areas. I haven’t run into a forest gardener living around here, for example.

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  4. Don Stewart says:

    A recurring theme is that agriculture is just visible oil and when the oil gets scarce or expensive we are all going to starve. If any of you are going to mindlessly repeat this mantra, you should at least take a look at this article, describing the new rice yield record holder in the world–a small farmer with a one acre plot in India–using very little in the way of oil in his production. These methods are not new, as you will find if you read the article. I have repeatedly stressed many of the same themes here–with uncertain success in communicating. Maybe this article written by a professional will make a difference. (The article came to me from a Professor at NCSU).

    I do want to note one thing. When they talk about controlling weeds with ‘mechanical methods’, I am pretty sure that is weeding with hand tools. So these methods are likely to be more labor intensive…which loops back to my many observations that governments need to stop persecuting people of modest means…since I don’t think farm labor is ever likely to pay as well as hedge fund management and coupon clipping.

    Don Stewart
    http://independentsciencenews.org/un-sustainable-farming/how-millions-of-farmers-are-advancing-agriculture-for-themselves/

    • Don Stewart says:

      One added thought. If you believe that no agricultural policy change can make it through a legislative process without passing through the needle eye of corporate profit, then you will dismiss the methods described in the article as ‘impractical in the real world’. Because corporations are not deeply involved in the production and have little opportunity to skim large profits. Therefore, we can expect derision and hostility and Hillary Clinton running around to conferences saying that everyone is going to starve unless we all get behind Monsanto and Cargill and Coca-Cola.

      But be sure you identify the root cause–and it isn’t the hostility of Mother Nature. A lack of oil creates problems, but not catastrophic problems.

      Don Stewart

      • Don Stewart says:

        As luck would have it, Gene Logsdon’s post today reviews a book which explains how to construct on only one tenth of an acre something akin to the food forest that Martin Crawford has grown in England. I will be back with a qualification which frames one of the things you need to think about if you are considering the question ‘can we feed ourselves’.

        http://www.resilience.org/stories/2012-12-05/what-is-space-anyway

        I just finished reading a pre-publication copy of Paradise Lot, by Eric Toensmeier and Jonathan Bates (out next year) that makes me wonder exceedingly about the meaning of what we refer to as “space.” On only one tenth of an acre, the authors tell how they squeeze in 150 to 200 different kinds of food plants, including some in a pond and more in a greenhouse, all for year round eating in the north. From this “space” they are harvesting 400 pounds of perennial fruits and vegetables every year (some of which I have never heard of, like Rebecca violets) plus lots of annual vegetables. The book includes a detailed layout map showing how they do it, but I’m still finding it hard to believe. The best way I can think to describe their method is that they’ve eliminated space in their garden except for the pathways, which they are trying to fill with useful low-growing plants too. From now on, when someone asks me how we can prevent food scarcity forever I have a ready answer. Simply eliminate our preconceived notions of space. With work and knowhow, we can always find room to grow more food. Using the forest food methods of Paradise Lot, I have a hunch we could right now be growing all the food we need simply by eliminating all the space taken up by America’s lawns and filling it with food producing plants. If we run out of that space, there’s thousands and thousands of miles along all our roads which could be growing food or fiber.

        Back to me. I don’t know whether the Paradise Lot is entirely self-sufficient in terms of nutrients and water. So you need to ask yourself where the water is coming from now, how long that supply will be reliable, and whether the supply might be impacted by either climate change or energy and financial crises which prompt the neighbors to start harvesting more of the water which originates on their property. (Organic matter and runoff water are currently a nuisance in suburbs, and freely available–but for how long?) Certainly, with their heavy reliance on perennials, the Paradise Lot is far more resilient than the average farm or garden.

        In terms of nutrients. These intensive gardening methods need a lot of compost. If you start with poor soil, you have to bring in compost and amend the soil heavily before you can get good yields, or spend several years growing soil building cover crops and perhaps grazing small animals on it. Once you have achieved good soil fertility, the trick is not to lose it. Good water management plus assiduous recycling of all organic matter (including your own waste) is the key IF you are growing for your own consumption. If you are growing to sell for cash, then you must replace the nutrients you have sold for cash by bringing in organic matter from somewhere else. Where the ‘somewhere else’ is makes a difference. If you have divided your property in two parts and grow a cash crop on half and grow compost on the other half, the problem of moving compost is small. If you are bringing in compost from 20 miles away, you are more reliant on fossil fueled transport. You could use horses or oxen to move the compost, but then you have to feed the horse or ox and you have to do that 365 days a year.

        So…when you read Paradise Lot when it is published (and I think you should), keep these sorts of questions in mind….Don Stewart

        • donsailorman says:

          My sister’s favorite book on small-scale farming was the famous classic “Five Acres and Independence” by Maurice Kains. It is still available, both new and used on amazon.com

          My late sister had five irrigated acres in Georgetown, California in the heart of gold country. She kept half a dozen milk goats, chickens and rabbits for meat and eggs, and she had a big corn patch, plus fruit trees, berry bushes and a big vegetable garden. She was very nearly self-sufficient, but she had to sell her dairy products to pay for things such as health insurance, gasoline, and repairs to her twenty year old car. She would often go to the local farmers’ market and trade her cheese and yogurt and eggs for other produce grown on other gardens or minifarms. Her farm was 100% organic.

          • Don Stewart says:

            And…if you don’t believe me about the necessity for assiduous recycling, see:

            http://www.motherjones.com/tom-philpott/2012/11/are-we-heading-toward-peak-fertilizer
            But the next time someone facilely insists that the “industrial farms are the future,” ask what the plan is regarding phosphorus. Developing an agriculture that’s ready for a phosphorus shortage means a massive focus on recycling the nutrients we take from the soil back into the soil—in other words, composting, not on a backyard level but rather on a society-wide scale. It also requires policies that give farmers incentives to build up organic matter in soil, so it holds in nutrients instead of letting them leach away (another massive problem stemming from our reliance on abundant NPK). Both of these solutions, of course, are specialties of organic agriculture.

            Back to me. While Philpott rejects the ‘backyard’ solution, I think it is vastly better than doing nothing if it happens to be your backyard and your are growing a substantial share of your own food in that backyard.

            • donsailorman says:

              Both my mother and my sister used fish guts to fertilizer their corn patches. Native Americans often planted a small fish with a corn seed, but you get results just as good by using only the guts. My mother had a large patch of Black Mexican corn in our Victory garden, and in my whole life I have never had corn on the cob that was as sweet or good as that Black Mexican corn that my mother grew in White Bear Lake, close to St. Paul, Minnesota.

              From about the age of four my sister was a great angler. We could legally catch 100 perch a day and the same number of sunfish from White Bear Lake. Both perch (which is essentially a smaller version of walleye pike) and the sunfish are excellent fish to eat for people, but we would freeze the fish and feed them to our cats usually. All our cats thrived on a diet of nothing but fish.

        • Thanks! The last part of your comment relates to the, “Where does the compost come from?” question I raised in response to another question.

    • Thanks! It is interesting that wider spacing, incorporating more organic material, and better water management can do so much.

      I remember hearing that higher US corn yields were the result of closer spacing–working in exactly the opposite direction.

      I wonder how much organic material is really available for mixing in. We obviously don’t farm every acre, so leaves from trees in unfarmed acres could be added, as well as available manure. Maybe there is plenty of organic material for the farm,s as well as for the original locations. It would seem like there is an upper limit to the amount of organic material that can be taken away from other areas, without doing harm to those areas, but maybe this isn’t an issue.

      • Don Stewart says:

        Gail
        First, you are at the limits of my understanding, so caveat emptor.

        Nobody takes organic material to an old growth forest. That should tell us that Mother Nature is a very effective recycler.

        It seems to me that there are a couple of monkey wrenches which have been thrown in by humans:
        1. We try to increase production beyond what Mother Nature can sustain by planting corn and soybeans ‘fencerow to fencerow’.
        2. We export the most nutrient dense parts of the crops (the corn kernels and the soybeans) off the farm where they eventually end up flushed into the sea. Thus, we are steadily subtracting nutrients. Our current strategy is to replace them with mining which depends on fossil fuels and depleting supplies.
        3. We plow which instigates a lot of bacterial activity which increases yields in the short terms but decreases them in the long term because the bacterial activity burns the humus out of the soil.

        Having begun those three misguided efforts, and in combination with other misguided efforts, we have reached a point where yields can now be increased by using soil and plant science to do things quite differently. But the ‘quite differently’ implies a level of human husbandry that we find distasteful. We want to master video games, not crop synergistics or the science of gardening with microbes. And so all our institutional pressure is to do more of the same disastrous practices.

        Don Stewart
        PS As for the lack of forest gardeners in Atlanta. Albert Bates recently organized, at The Farm in Tennessee, a 10 day forest gardening session–and I believe Eric Toensmeier was one of the instructors. I believe the session drew 35 people. From little acorns…

        However, it is true that Andrew Jackson did his best to exterminate the forest gardeners. A Cherokee woman knew (if I remember correctly) 7000 plants and their uses. I used to live near the spot which the Cherokee’s regarded as the Center of the Universe–near Hartwell.

        • donsailorman says:

          I suspect your memory played a trick on you: I doubt that Cherokee women knew the potential of 7,000 plants. For one thing, I do not think 7,000 plants exist in traditional Cherokee country. I’ve studied a lot of anthropology, and in contemprary hunter and gathering societies the number of plants the women gatherers knew about and used was roughly 700 (from about 400 to 1,000).

          Otherwise, I agree with you completely. I have found it very useful to study the techologies of Minnesota Native Americans. Over time I acquired a lot of Native American skills, such as flint knapping, wild-rice gathering, making fish traps with no metal and also making excellent pemmican, which lasts indefinitely and is an energy-dense food.

      • Don Stewart says:

        Gail
        Another thought prompted by the quotation someone gave you from Donnela Meadows about bad price signals.

        The price signals we get today are that financial speculation pays very well, while husbandry of plants, animals, land, water, and solar energy pays very poorly. Just suppose for a moment that those price signals are disastrously wrong in terms of long term human survival.

        It is a fact that thoughtful, skilled people have come up with a variety of systems which depend on the careful husbandry that we currently believe has ‘little value’. It is also very probable that the correct system to choose depends very much on where you are and your particular circumstances. For example, if you are in the eastern third of the US and have a decade, a forest garden where you live may make a lot of sense. Perhaps you supplement your food supply in the early years by working at a community garden or on a small farm.

        If you are in the semi-arid or arid parts of the country, an intensive grazing program will probably occupy most of your (larger) plot. Earthworks to sink water into the ground will need considerable work. You may garden seasonally with irrigation from ponds.

        If you need a whole lot of food right now, because things are collapsing around your ears, then perhaps the Bio-Intensive methods of John Jeavons will make more sense to you. Half your property is likely to be devoted to growing compost. Perhaps the work of Emilia Hazelip in France or the simple methods using lots of mulch will fill your needs. If, like Joel Salatin, you have inherited severely degraded land, you are likely to use intensive grazing to rebuild the soils.

        In any event, there are likely to be some commonalities. First, you will assiduously recycle nutrients. Second, you will rely on the soil food web to mineralize the nutrients which the plants need. Third, you will rely on the plants ability to attract the soil food web to their root zone (the rhizosphere) with exudates to promote the mineralization (as opposed to adding NPK fertilizers). Fourth, you will make sure you are growing lots of nitrogen fixers. Fifth, you will either rely on a forest to slow down and sink water into the ground or else you will construct earthworks to help do that. Sixth, you will use lots of clever methods for controlling solar energy (such as Joel Salatin’s veggie garden floating on a raft in his pond or using tall plants to provide shade for leafy greens that benefit from it).

        Seventh, while you may never equal the knowledge base of a Cherokee woman, you will know several hundred plants. Even those which you want to get rid of will probably have some use. And eighth, conservation of human energy will be a prime consideration–but you will still do a lot of physical work.

        Regardless of the particular method you choose, if you are actually successful, it is likely to be because you spend a lot of time thinking and working intelligently to create the conditions for the flourishing of plants. If you are grazing intensively, you will call yourself a ‘grass farmer’. You will increase the biological activity on your land by several multiples above that common today–and you will tilt the table in favor of human flourishing without destroying everything else.

        Don Stewart

  5. Greg Yurash says:

    Gail – Figure 7 shows that Interest on the national debt is becoming a major sink for government dollars. It is important to see that this interest today, let alone it’s future growth, is waisted money. Interest payments buy no services, no economic activity, no tanks or bridges or Medicare Doctor’s wages.

    The U.S. constitution allows for the government to print it’s own money. Yet we are instead held hostage to the Federal Reserve, where-in the government borrows money into existence from private banks and pays them interest on it. This is the world’s largest Ponzi scheme. Eliminating the Federal Reserve will not solve all budget issues, but it would be the quickest fix with the largest impact on the budget. The question would become if there is enough political will to fight the banksters. That will certainly isn’t showing itself in D.C. It would have to be a grass roots movement, but our fellow citizens are currently too hypnotized by reality TV and the sports channel to have a clue.

    • I am afraid I don’t understand the interlinkages well enough to comment on that idea. At some point, we will need to reduce debt. This seems likely to have a very negative impact on growth in GDP, since GDP is a measure of consumption, not how that consumption is financed.

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  8. Don Stewart says:

    To Don Sailorman
    Another good idea is to put a few tall T bars around your garden. Birds like to land and survey the scene (looking for cats and snakes and such) before they commit themselves to serious foraging. Very frequently, they leave you a mineral rich deposit. Move the T bars around to spread the wealth.

    Don Stewart

    • donsailorman says:

      Thanks. I think that horticulture (gardening) rather than agriculture (with a plow) may be the wave of our future. On her five acres my sister practiced nothing but horticulture with a hoe and refused even to use a Rototiller.

      It is possible to build a high level of civilization on gardening. See HUMAN SOCIETIES: An Introduction to Macrocociology,” by Nolan and Lenski, any edition. I happen to like the old eighth edition, because I worked on and gave my endorsement to that edition, but any edition will do, and the old ones on amazon.com are very cheap.

  9. ¿Based on Figure 1, we either need to raise taxes by a little more than 15% of wages, and keep raising taxes in the future to keep up with an escalating problem, or we need to cut back on government benefits, such as unemployment insurance, Social Security and Medicare.?

    Cut government benefits? NO–CUT MILITARY SPENDING. The US is spending billions every years on wars not only in Afghanistan, and formerly Iraq, but on military operations and proxy wars in 8 nations (currently), with more billions spent every year on military bases and operations around the world. This is an unsustainable military empire; it’s killing the US budget and the US taxpayer, and destroying people and economies around the world. And there’s no justification for it. morally or financially.

    • donsailorman says:

      Check the numbers. If we cut military spending to zero we would still have a large national deficit. The 800 pound gorilla is entitlement spending; by comparison all other spending by government is relatively small potatoes.

      Military spending, including Veterans’ benefits of health care and pensions is a smaller percentage of real GDP than was military spending during the Reagan administration, when there was a very large buildup in spending on the armed forces.

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