The United States government will never have another balanced budget again. Yes, you read that correctly. U.S. government finances have now reached a critical “tipping point” and things are going to spin wildly out of control from this time forward. Why? Spending on entitlement programs and interest on the national debt are now accelerating at exponential rates. Some time around 2020 they will eat up every single dollar of federal revenue that is brought in before a penny is spent on anything else. Of course the solution to all of this would be to radically cut entitlement programs, but no U.S. politician in his or her right mind would do that. After all, do you think elderly people (who vote in droves by the way) would vote for you after you just cut their Social Security checks in half? That is not the way the world works. You see, democracies always get into trouble once the people realize that they can vote for the candidates that promise them the largest gifts out of the public treasury. That is where the United States is at now. Over 100 million Americans now receive direct payments from the United States government. For millions of Americans, the American Dream now means getting a government check and kicking back and enjoying life. We have become a nation that is chock full of people that can’t take care of themselves and that are totally dependent on the monolithic nanny state that the U.S. government has created.
Now, the truth is that helping the poor and those who cannot help themselves is always a good thing.
Nobody is denying that.
But are there really 100 million Americans that cannot take care of themselves?
Of course not.
The welfare state has gotten wildly out of control and now we are drowning in an ocean of red ink because of it.
In fact, unless the underlying laws for the entitlement programs are rewritten and unless benefits are cut to the bone, it will be mathematically impossible for the U.S. government to balance the federal budget from this time forward.
You are skeptical of that claim?
The following are 14 reasons why the U.S. government will never have a balanced budget ever again….
FORTUNE — Of all the highlights of Allan Meltzer’s half-century as a distinguished monetarist — advising Presidents Kennedy and Reagan, producing celebrated books on John Maynard Keynes and the history of the Federal Reserve — none proved more memorable than a crisis session at 10 Downing Street in mid-1980.
A group of 346 noted economists had just written a scathing open letter to Prime Minister Margaret Thatcher, predicting that her tough fiscal policies would “deepen the depression, erode the industrial base, and threaten social stability.” Thatcher wanted to make absolutely certain her unpopular attack on huge deficits and rampant spending, in the face of high unemployment and a weak economy, was the right one.
Two years ago, Milwaukee resident Peter Tubic nearly lost his home to foreclosure as a result of an unpaid $50 citation for parking an inoperable van on his own property. A government that arrogates to itself the supposed authority to regulate such matters won’t scruple to add extortionate penalties to the original citation; thus it’s not surprising that the City of Milwaukee eventually demanded $2,645 from Tubic as ransom to prevent the seizure of his home. Eventually a local judge succumbed to an unprofessional fit of common sense and dismissed the citation outright.
Confiscation of a home to collect small debts remains uncommon. However, “people are routinely being thrown in jail for failing to pay debts,” reports the Minneapolis Star-Tribune. As is the case in Arizona, Arkansas, Indiana, Illinois, and other states, the Land of 10,000 Lakes is infested with agents of “well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect.”
As a result, it’s increasingly common for people who owe small amounts to find themselves being confronted by police – in the streets, at home or work, while driving, or even while recovering from surgery – and hauled away in handcuffs. Warrants have been issued over outstanding debts as small as $85, which is “less than half the cost of housing an inmate overnight.”
The turmoil that has stricken Greece has spread to Romania and Ireland. This crisis may be spreading worldwide as the debt crisis continues, there have been reports that it may spread to Japan, one of the biggest economies in the world. Gerald Celente says that this is the greatest bank robbery in history and it is the banks that are doing the stealing.
by Ellen Brown
Author, “Web of Debt”
hat tip: opednews.com
May 7, 2010
Last week, Goldman Sachs was on the congressional hot seat, grilled for fraud in its sale of complicated financial products called “synthetic CDOs.” This week the heat was off, as all eyes turned to the attack of the shorts on Greek sovereign debt and the dire threat of a sovereign Greek default. By Thursday, Goldman’s fraud had slipped from the headlines and Congress had been cowed into throwing in the towel on its campaign to break up the too-big-to-fail banks. On Friday, Goldman was in settlement talks with the SEC.
Goldman and Wall Street reign. Congress appears helpless to discipline the big banks, just as the European Central Bank appears helpless to prevent the collapse of the European Union. . . . Or are they?
Suspicious Market Maneuverings
The shorts circled like sharks in the Greek bond market, following a highly suspicious downgrade of Greek debt by Moody’s on Monday. Ratings by private ratings agencies, long suspected of being in the pocket of Wall Street, often seem to be timed to cause stocks or bonds to jump or tumble, causing extreme reactions in the market. The Greek downgrade was unexpected because the European Central Bank and International Monetary Fund had just pledged 120 billion Euros to avoid a debt default in Greece. Strategically-timed ratings downgrades of this sort are so suspicious that Indian market regulator SEBI recently created a stir by asking the rating agencies operating in India for periodic reporting concerning their fees and rating norms.
The 2009 Financial Report Of The U.S. Government has finally been released, and the news is not good. It basically confirms much of what we already know – that the United States government is a complete financial mess. The U.S. government budget deficit for 2009 was a record-setting 1.417 trillion dollars. The total liabilities of the U.S. government rose from 12.178 trillion dollars at the end of 2008 to 14.123 trillion dollars by the end of 2009. At their present rates of growth, the interest on the national debt and spending on entitlement programs will gobble up almost every single dollar of federal revenue by the end of the decade. Throughout the report, the word “unsustainable” is repeatedly used. The authors of the report understand that the U.S. government simply cannot keep spending and borrowing like it has been recently. But if the U.S. government slows down this reckless spending even a little bit it could literally plunge the U.S. economy into a deflationary depression. In fact, even with all of the “bailouts” and “stimulus packages” there are many who would argue that we are already in a depression. In any event, the authors of the report make it clear that the United States government is facing a financial crisis of unprecedented magnitude.
Just consider the following chart below. This chart comes straight out of the 2009 Financial Report Of The U.S. Government, and it shows how explosively federal deficits have grown in recent years….
For Europe’s poorest countries, European Union membership has long held out the promise of tranquil prosperity. The current Greek financial crisis ought to dispel some of their illusions.
There are two strikingly significant levels to the current crisis. While primarily economic, the European Economic Community also claims to be a community, based on solidarity — the sisterhood of nations and brotherhood of peoples. However, the economic deficit is nothing compared to the human deficit it exposes.
To put it simply, the Greek crisis shows what happens when a weak member of this Union is in trouble. It is the same as what happens on the world scale, where there is no such morally pretentious union perpetually congratulating itself on its devotion to human rights. The economically strong protect their own interests at the expense of the economically weak.
The crisis broke last autumn after George Papandreou’s PASOK party won elections, took office and discovered that the cupboard was bare. The Greek government had cheated to get into the EU’s euro zone in 2001 by cooking the books to cover deficits that would have disqualified it from membership in the common currency. The European Treaties capped the acceptable budget deficit at 3 per cent and public debt at 60 per cent of GDP respectively. In fact, this limit is being widely transgressed, quite openly by France. But major scandal arrived with revelations that Greece’s budget deficit reached 12.7 per cent in 2009, with a gross debt forecast for 2010 amounting to 125 per cent of GDP.
With the United States and much ofEurope buried in public debt, many wonder how world governments will solve their impending budgetary crises. The economics profession has split into two camps: those who promote more spending; and their opponents, the “deficit hawks.” The spenders have been the more vocal, largely due to their dominance in mainstream academia.
Keynesian economists, like Paul Krugman, argue that growing debt will not be a problem given that large government debts are not unprecedented. For example, Krugman argues that the United States ran large debts during the Second World War and was able to pay them off after the war ended. This Princeton professor and Nobel laureate also argues that, because the United States is one of many countries piling up debt, its public debt is justifiable and tenable.
Paul Krugman conveniently leaves out, or fails to apply, some key details. Regarding the Second World War, he notes that the debt was paid off largely because of a cut in government spending. He fails to account for the fact that the most dangerous factors behind the current debt are “unfunded liabilities” — the future costs of welfare and social-insurance programs. As for those other countries building debt, they are also looking at political uncertainty and almost-certain economic collapse.
The US Economy is Set for a “Double-Dip” Recession
by Paul Craig Roberts
Happy news! The government has come up with a 5.9 percent GDP growth rate in the fourth quarter of 2009. The recession is over.
Or is it?
Statistician John Williams has informed us that 69 percent of this growth, or 4.1 percentage points, is the result of inventory accumulation. That leaves a 1.8 percent growth rate, and the 1.8 percent is likely due to the underestimate of inflation and other statistical problems.
The Federal Reserve’s own monetary evidence contradicts the recovery assurances from Fed chairman Ben Bernanke. The Federal Reserve continues to pour massive reserves into the banks. The monetary base, which consists of currency in circulation and bank reserves (the basis for new loans), has surged from $850 billion in 2009 to $2.2 trillion on February 24.
Despite this potential for massive new money creation, the broadest measure of money growth is still contracting.The banks are too impaired and so are consumers for the banks to create new money by making loans.
Hat tip: Mises Daily
by Mark Thornton
Thursday, November 14, 2002
For a few billion dollars you might expect to be able to bribe some small third world country into cleaning up its act, to defend the property rights of its citizens, to provide a stable currency, and to establish a non-interventionist economic and foreign policy.
With little Switzerlands and industrial revolutions developing around the globe, the U.S. could provide the examples that would establish a classical liberal world order within one generation with less than 1% of the federal budget.
Alas, Americans are united in their opposition to foreign aid—and with good reason! Foreign aid, military aid, debt relief, economic development assistance, and even disaster assistance money—all with “strings attached” to ensure proper behavior—are associated with “fraud, waste, and abuse.”
U.S. aid designed to bring about peace in the Middle East is an ideological seedbed of hatred, war, and terrorism. The big players in foreign aid, the International Monetary Fund and the World Bank, are more likely to bring about economic meltdown and social calamity than economic stability.
Ludwig von Mises pointed out (Planning for Freedom) that foreign aid doesn’t create friends in foreign lands, it creates ideological enemies who wish to do us harm:
The United States, they think, is aiding them because its people have a bad conscience. They themselves pocket this bribe but their sympathies go to the socialist system. The American subsidies make it possible for their governments to conceal partially the disastrous effects of the various socialist measures they have adopted.
Mises is here referring to our “friends” in Europe, but the same could be applied to the Middle East, Africa, the Western Hemisphere, and Asia, with the only possible exception being countries like Vietnam and Australia who receive limited or no foreign aid from the United States or the international organizations that we control.
The fraud and failure of foreign aid is now so obvious that it has ended up in the pages of the American Economic Review!