One of the great protest songs from the late 1960s was Barry McGuire's "Eve Of Destruction."

The song came to mind today while reading an Associated Press (AP) report describing Obama's 2011 Federal budget.

His proposed budget calls for a record-breaking spending level of $3.8 TRILLION and a one year deficit of $1.56 TRILLION.

In other words, his budget will require the Federal government to spend almost 70% more than the expected tax revenue it will collect.

Obviously, the government will have to borrow money from any individual or nation who will lend it to us, sinking the country's financials deeper into debt in order to cover this revenue shortfall. Further, he expects the deficit to "shrink" to just under $1.3 TRILLION the next fiscal year.

Let's do some simple math:

• If each U.S. household had to pay for the $1.56 TRILLION deficit, the cost per household would come to about $12,000 per household. This would be above and beyond the taxes needed to cover the non-deficit portion of the budget.

• If we look at last year's deficit level, this year's deficit level, and the proposed deficit for the next two years, the political class in Washington is expected to overspend its tax collections by about $5.7 TRILLION. On a per household basis, this comes to about $44,000 per household.

• The Obama administration has proposed to freezing spending levels in some government areas, claiming that this action will save about $250 billion over the next ten years, or about $25 billion per year. If those savings ever materialize, the $100 billion savings over four years would result in each American household theoretically getting back $769 in savings. The $769 in savings represents less than 2% ($769/$44,000) of the additional taxes that are going to be required at some point to pay for the deficit spending of Washington.

• The deficit cost over the next decade, according to the proposed budget, would be about $8.5 TRILLION. If you add in the $2.8 TRILLION deficits from the past year and this year, the total deficit spending of the political class could be $11.3 TRILLION or a whopping $87,000 per household. Since the government is notorious for underestimating costs, this $87,000 estimate is probably understated.

A favorite tactic of the political class is to try and restrict tax increases to the so-called "rich", figuring it is politically safe to introduce new spending if you claim only the "rich" will pay for it.

However, consider the one year, 2011 expected deficit from the Obama administration, $1.56 TRILLION.

If you look at the March, 2009 issue of Forbes magazine, which listed the assets of the richest people in the world, you will find that the net worth, not the net income, of the twenty richest Americans is about $340 billion.

Thus, if the government confiscated the total worth of these twenty Americans, it would only pay for about 22% of ONE YEAR'S DEFICIT spending. The rest would have to be paid for by the rest of America, the “non-rich.” Over ten years, the total confiscated wealth of the twenty richest Americans would cover just 4% of the $8.5 trillion deficit. The other 96% would have to be paid by the "non-rich", i.e. the rest of us.

Looks like Barry McGuire was right, he just got the cause wrong, we are on the eve of destruction.

We are on the eve of destruction from a financial perspective.

• As the deficit gets bigger and bigger, the available credit and capital required to support that deficit will drain money out of the private credit markets.

  >li>Businesses will find it harder to get affordable credit and loans to expand, stifling employment growth.

• As the deficits get larger, those buying the bonds to support the deficit spending will require higher and higher returns as the risk of default accelerates, causing the deficit to get bigger even faster, sucking even more capital out of the private sector.

• Taxes must go up eventually for everyone, not just the rich, to feed the deficit beast in order to avoid or delay a government default, taking more wealth out of the economy.

• With less disposable income due to tax increases, households will purchase fewer products and services, further depressing the jobs market.

What could be done to help Obama reduce the deficit? Here are any number of simple suggestions:

• The U.S. currently has over 50,000 troops stationed in Germany, almost 50,000 troops stationed in Japan, and about 30,000 troops stationed in Korea. These deployments are from another age and time, we can no longer afford to garrison these types of troop levels around the world. In conjunction with the President’s autumn Afghanistan speech, the administration estimated that it costs about a million dollars a year per soldier to deploy them in that country. If we assume that the deployment cost is less than that in non-fighting zones (say we arbitrarily reduce the $1,000,000 cost down to $600,000) then by bringing back the 130,000 troops we have just in Germany, Korea, and Japan, we could save about $78 billion a year, every year going forward.

• One of the attractions of voting for Obama the candidate was his promise to get us out of Iraq as soon as possible. That promise has not been fulfilled as of today and worse yet, he has vowed to keep 50,000 troops in that country for the foreseeable future. If we go conservative and use the $600,000 estimate per year per soldier, the savings of getting everyone out of Iraq would be about $30 billion a year.

• We need to review all military costs we are shouldering for other nations and determine if paying all of the costs is worthwhile or cost effective. The perfect example of this type of cost savings was reviewed in an article from the New York Times that was reprinted in the St. Petersburg Times on Sunday, January 31, 2010. It described the missile defense system that the Obama administration is deploying in the Persian Gulf to protect the world from the threat of Iranian missiles. If we are protecting the world, specifically oil rich nations in the Persian Gulf, why shouldn’t those nations pay for the privilege of being protected by our missile defense system? There are probably hundreds of these types of programs where we pay for everything to the benefit of others. Those times are over, we cannot afford them any more.

• A number of times, Obama the candidate promised to keep wasteful Federal government earmarks below 2,000 per year. Unfortunately, the current Federal budget, that Obama signed in the fall, has over 11,000 earmarks, wasting billions of dollars. One way to get this problem under control is to institute a rule that no Federal spending, project, or program would be funded unless it materially affected a large number of residents in at least five states. In this way, the Federal government would not be building farmers' markets in Kentucky, building bike trails in Michigan, or do any other wasteful programs such as these.

• Benefit and retirement perks for future Federal employees need to be reduced. Since most Americans do not currently get both a pension and access to a 401k retirement plan (in fact, many, many Americans have access to neither), it is not fair for future Federal employees to get both. Thus, the Federal employee pension system should be phased out over time with new employees having access only to a fair 401k type retirement option, putting them on a par with most other Americans.

• Every government agency needs to do a ground up review of all of its expense lines and programs. Many Federal programs take on a life of their own even when their original purpose has disappeared. There is great redundancy across multiple Federal entities that could be reduced along with the corresponding budgets. We need to do a basic business and functional analysis of all government functions, giving each department and agency an aggressive budget reduction target (say 10% a year for five years) in order for the hard cuts to be made in nonessential expenditures.

• Rather than increase funding by deficit spending, the Federal government needs to self fund itself by wringing the billlions of dollars of fraud out of the big government programs such as Social Security and Medicare. If you are losing dollars from fraudulent activities, increasing spending is likely to increase the waste lost to fraud. An investment in additional anti-fraud resources for Social Security and Medicare should pay many dividends in government spending savings.

• An independent panel, without politicians and without lobbyists, needs to be formed, and staffed by smart Americans like we did with the Manhattan Project, the Apollo space mission, the military base closing commission, etc., which would take a comprehensive look at how to reduce the escalating health care and Medicare costs, currently about half a trillion dollars a year. The past year has proven that the political class is incapable of creating fair, effective, and cost reduction national health care legislation.

The above ten ideas would go a long way to getting the Federal budget under control. I am sure that other, smarter people could come up with many other smart, insightful ideas for getting the government's growth contained. Unfortunately, no one in the political class has shown the bravery to tackle such a task, leaving us all on the "Eve Of Destruction", financially speaking.