U. S. Budget Death Spiral

Please consider this chart of US debt from all sources (government and private) relative to GDP. In other words, this calculation shows debt relative to our ability to pay the debt. In case you cannot read the writing on the graph, what you see is that debt/GDP is higher now than even at the beginning of the Great Depression:

 

Now, consider the US Debt Clock at this website:

http://www.usdebtclock.org/

And ponder the information in this article:

http://www.prudentbear.com/index.php/guestcommentaryview?art_id=10251

The article points out that the current nominal debt of the US Government is $11 trillion ($12 trillion as of November 2009). Divided by our population of 304 million, this works out to $38,000 per person. So a family of 4 is looking at $152,000 as their share of the debt. But that is just today. This is the tip of the iceberg for several reasons:

1.  The U.S.’s unfunded and off-balance sheet contingent liabilities stand at over $100 trillion depending on how you want to calculate them. The so-called unfunded liabilities include Social Security, Medicare, Medicaid, Fannie Mae debt, etc. Remember, Social Security and Medicare are madoff/ponzi schemes. That is, these programs are not funded. They rely on taxing current workers to pay the benefits of the elderly. The system was never designed to handle the now burgeoning retired population; indeed, it cannot handle it.

2.  The 2010 federal budget projections show 40% of the federal government’s expenditures coming from borrowed money! (Does this fry your hair?!) The Obama administration said in mid 2009 that we will add another $9 trillion to the national debt over the next 10 years, bringing the nominal debt to a staggering $20 trillion. But according to www.whitehouse.gov, this figure by late 2009 was already out of date. It is now expected that we will add $12 trillion dollars in 10 years!

3.  But even these projections are themselves the tip of the iceberg. They are based on optimistic assumptions about an economic recovery. A “normal” economic recovery is unlikely (we argue impossible) given that consumer debt verses GDP is at an all time high.

Consumers have no more borrowing power to fuel the economy. We have mortgaged our future. We are up to our eyeballs in debt. What this means is that as consumers inevitably will go through an extended period of paying off debts over the next many years. Symptomatic of the problem is that, by one estimate, we are approaching 40-50% of families who have a home mortgage being “underwater” on their mortgage—that is, they owe more on their home than the market value. This is an unprecedented problem for the economy. This situation alone is almost certain to make the economy very sluggish for the foreseeable future.

So the future budget deficits and thus debt projections are very likely understated, and perhaps understated by a large amount. But there is even more room for concern:

4.  The number of people in the United States who are 65 or older is expected to double by 2030, further taxing the welfare ponzi schemes.

5.  The interest on the debt ALONE may soon exceed our per capita income (http://www.scrivener.net/2009/08/six-ways-us-wont-escape-its-national.html).

6.  The nationalized health care proposals—which are likely to pass in some form—are not yet in the above projections. Every state that has tried such schemes (Maine, Massachusetts, Hawaii, Tennessee, and Oregon) has found that the costs are consistently enormously higher than projections. (“If you think health care is expensive now, just wait till it’s free.”) There are numerous articles on the internet that you can find about the disasters that socialized health care has produced in these states. The economics on the administration’s socialized medicine is pretty simple. They want to add 46 million people and add over 40 new government bureaucracies–and are telling us that it will save money. Well, where is this money supposed to come from? The truth is that socialized medicine will force much higher taxes and more debt (not to mention bring worse health care).

Can the USA actually go broke? Well, yes!!

Finally, Americans must consider the root causes for this problem. What is the morality of your economic views? Please consider these questions:

http://www.realclearmarkets.com/articles/2009/08/24/what_is_the_foundation_of_your_economic_beliefs_97371.html

 Other good links:

Scary: http://trueslant.com/nancymiller/2009/09/20/debt-bears-say-grants-optimism-is-bull/ 

How much debt is too much: http://www.forbes.com/2009/09/10/national-debt-default-opinions-columnists-bruce-bartlett.html

Who is more efficient: http://www.gerrycharlottephelps.com/2009/08/fed-govt-wastes-more-money-than-business-charity.html

Crippling: http://online.wsj.com/article/SB10001424052970203585004574393110640864526.html

History: http://www.american.com/archive/2009/september/debt-be-not-proud-the-sorry-tale-of-america2019s-out-of-control-spending

Jobs: http://www.realclearmarkets.com/articles/2009/09/14/saving_one_million_jobs_at_787000_per_job_97404.html

Cost of Cash for Clunkers: http://seekingalpha.com/article/152909-cash-for-clunkers-may-cost-up-to-45-354-per-vehicle and                                          http://blog.lib.umn.edu/levin031/transportationist/2009/09/cash_for_clunkers_cost_exceede.html

 20 Questions about ObamaCare: http://www.freerepublic.com/focus/f-news/2350627/posts

 

30+ Reasons for Obama Fans to Re-Consider

With evidence, logic, and references

the best summary of Obama’s politics on the web

By Charles Meek, Off-Grid Blogger

I was motivated to put this list together for a couple of reasons. First, I have heard some people say that they will vote for Barack Obama, but could not give any reasons why. But likewise, I have heard some people say they plan to vote against Obama, but again could not give any substantive reasons why. So I decided to put together solid information. Barack Obama has been objectively rated the single most liberal member of the US Senate: 100^th out of 100. In fact, he has the most liberal voting record in US Senate history! Is this just so many words, or does it mean something? To our liberal friends: I know that your fundamental beliefs will be challenged here. But you are invited to respond, hopefully with logic and facts, not rants. Well, let’s take a look by categories.

ENERGY, THE ENVIRONMENT, AND THE ECONOMY

1. Obama thinks the answer to high energy prices is to set our thermostats to a less comfortable level and inflate our tires. The fact is inescapable that liberal Democrats are obstructionists on energy and are squarely responsible for blocking all initiatives on energy policy. See http://archive.redstate.com/blogs/josh_painter/2008/jun/29/dems_to_america_no_you_cant. We will need between 16 and 20% more energy in the next 20 years (http://www.apienergyarcade.com/energyiq/). We need to move forward NOW to open drilling with modern environmental safeguards. We need more nuclear energy, more coal, more natural gas, and more oil. It is inexcusable that current government policy restricts access to 85% of potential offshore U. S. oil and natural gas development sites.

2. Obama is outright lying to the American people about taxing the middle class. He says he won’t raise taxes on the middle class. But he says he will take away the Bush tax cuts. That’s a tax increase, no matter how you spin it. Further, he has a free lunch syndrome: free college, free health care, free job training, free child care, more subsidized housing, government subsidized 401(k) plans, etc. Here’s a clue: There is no free lunch. According to the nonpartisan National Taxpayers Union, Obama’s fiscal agenda will cost $344 billion per year (http://www.ibdeditorials.com/IBDArticles.aspx?id=300409426744996). He is running on a campaign of higher payroll taxes, higher corporate taxes, higher income taxes, eliminating the Bush tax cuts, higher taxes on dividends, and higher capital gains taxes. In fact, see this link to understand why there are 4 ways that Obama’s plan actually RAISES taxes on the middle class: http://http://www.freerepublic.com/focus/f-news/2116252/posts.  While I am fed up with Democrat’s and Republican’s continued failure to balance the budget, I have more hope for Obama’s opponent than for Obama. John McCain has been a long time champion against pork barrel spending, and has been a budget hawk more than most in Washington.

3. Obama’s tax policies will hurt the economy. Our economy is in a precarious situation. I think that if we falter here, a very serious recession is possible. Here is a most interesting comparison to the Depression era president Herbert Hoover. Hoover dramatically raised taxes in 1932 during the Depression, which economists now recognize as perhaps the biggest tax blunder in American history. This sucked money out of the productive economy. And there is more to compare with Herbert Hoover. According to the book How Capitalism Saved America by Thomas DiLorenzo, here are some things that Hoover stood for: labor union power (which slowed production during the Depression), minimum wages (which increased unemployment during the Depression), international tariffs via the “Smoot-Hawley-Hoover Act” (which slowed international trade during the Depression), and controls on industry including the electric power and oil industries (which depressed the economy further). Do these policies sound familiar? The segment of the economy that will be hurt the most is small business owners. He says he will “cut capital gains taxes for small businesses.” But small businesses DO NOT PAY CAPITAL GAINS TAXES; THEY PAY INCOME TAXES! My wife and I counted up; we regularly do business with over 2 dozen small business owners, and we hate to think how they will suffer under an Obama presidency.

Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.   —Ronald Reagan (1986)

4. Obama does not understand basic economics. His answer to any problem is a government solution. But remember this: Government does not produce anything; it only re-allocates, which is always subjective. The government’s role is to get out of the way so free enterprise will work best, while setting rules for fair play, that is, laws against fraud, collusion, etc. Ronald Reagan insisted that the best answer is “to get the government off the backs of the people.” Over time, the more capitalism is allowed to flourish, the better off everyone at every socio-economic level becomes. The goal of our economy is to produce more goods and services that people want at an affordable price. Anything that hinders that goal will hurt the economy. That’s why corporate taxes should be minimized, so production and employment are not hindered. His promise to tax corporations while not hurting the middle class is ignorant socialist ideology; any tax on corporations will effect anyone negatively who gets a paycheck from the company or buys products from the company! Individual taxes should be minimized, so people can buy what is produced (and still have something left to save). Thomas DiLorenzo in his book How Capitalism Saved America proves that every time that government has intervened with a solution to a problem (no matter how well-intentioned), it ends up making it worse. Before you challenge this, read this book. Every American ought to read it. Check out these essays from Investor’s Business Daily: http://www.ibdeditorials.com/series8.aspx.

Here’s my specific suggestion. As President, John McCain should appoint Congressman Ron Paul to head a special committee to examine ways to reduce the size of the federal government.