Peter1469
02-06-2012, 01:46 PM
Here is a blog post that is not to long and presents the official numbers and a reasonable rebuttal to those numbers. But even the official numbers are disastrous. The only thing that I disagree with is the analogy to the Wiemar Republic.
http://www.economicnoise.com/2012/02/01/government-is-dead-man-walking/ (http://www.economicnoise.com/2012/02/01/government-is-dead-man-walking/)
People are wildly underestimating the deficits America is going to run in this decade.
Here is why:
1)The average rate of interest the Fed has had to pay to borrow for the last two decades has been 5.7%. However, Obama/CBO is projecting the cost of money at only 2.5%.
A return to the normal Fed rate would, by 2020, add $5 trillion to the cumulative deficit.
2)They are overestimating growth in 2012-2022. 2.5% is more likely than the ridiculous numbers they are projecting. That would add $4 trillion by 2020.
Taken together, a U.S. return to a normal rate of growth of 2.5%, higher than today, and a normal rate of interest for the Fed could add as much as $9 trillion to the deficits between now and 2020.
3)The 5 biggest budget items are Defense-Military ($700 B), Social Security ($725 B), Medicare ($560 B), Medicaid ($275 B), and Interest on the Debt ($227 B)… Since it is (politically) impossible to cut any of these items, at best, this Congress will only slightly reduce the rate of speed at which we are heading toward a debt default.
In 2011, we spent $2.467 T on the big 5 budget items – Defense-Military ($700 B), Social Security ($725 B), Medicare ($560 B), Medicaid ($275 B), and Interest on the Debt ($227 B) – and only collected $2.302 T in taxes.
4)America is headed for an entitlement crisis. Between 2010 and 2030, spending on Medicare, Medicaid and Social Security will explode. And with the Baby Boomers retiring en mass over the next 18 years (2011-2029), at the rate of 10,000 a day, it will be impossible for any politician to do what is necessary in order to save us from going over the falls. Any talk of cutting entitlements and they will be quickly thrown out of office.
Is America then headed for an inevitable default?
Weimar Germany, Here We Come!
These are all symptoms though. This is not the problem. They are mere symptoms of the disease, the rot of our soul. The nations soul has been rotted out.
Eventually the world will realize that the U.S. deficit and debt are beyond the capacity of this U.S. government to bring under control.
At that point, the ratings agencies and world markets will begin to treat the U.S. debt the way they treat the debts of Italy and Spain.
As soon as interest rates rise the deficit-debt will explode…and it will be all over for America.
I think the CBO’s report is ridiculously optimistic. The situation is much worse than they are willing to admit.
There would be a Revolution in this country if they put out the real numbers and accurate projections.
This letter has been long enough…
http://www.economicnoise.com/2012/02/01/government-is-dead-man-walking/ (http://www.economicnoise.com/2012/02/01/government-is-dead-man-walking/)
People are wildly underestimating the deficits America is going to run in this decade.
Here is why:
1)The average rate of interest the Fed has had to pay to borrow for the last two decades has been 5.7%. However, Obama/CBO is projecting the cost of money at only 2.5%.
A return to the normal Fed rate would, by 2020, add $5 trillion to the cumulative deficit.
2)They are overestimating growth in 2012-2022. 2.5% is more likely than the ridiculous numbers they are projecting. That would add $4 trillion by 2020.
Taken together, a U.S. return to a normal rate of growth of 2.5%, higher than today, and a normal rate of interest for the Fed could add as much as $9 trillion to the deficits between now and 2020.
3)The 5 biggest budget items are Defense-Military ($700 B), Social Security ($725 B), Medicare ($560 B), Medicaid ($275 B), and Interest on the Debt ($227 B)… Since it is (politically) impossible to cut any of these items, at best, this Congress will only slightly reduce the rate of speed at which we are heading toward a debt default.
In 2011, we spent $2.467 T on the big 5 budget items – Defense-Military ($700 B), Social Security ($725 B), Medicare ($560 B), Medicaid ($275 B), and Interest on the Debt ($227 B) – and only collected $2.302 T in taxes.
4)America is headed for an entitlement crisis. Between 2010 and 2030, spending on Medicare, Medicaid and Social Security will explode. And with the Baby Boomers retiring en mass over the next 18 years (2011-2029), at the rate of 10,000 a day, it will be impossible for any politician to do what is necessary in order to save us from going over the falls. Any talk of cutting entitlements and they will be quickly thrown out of office.
Is America then headed for an inevitable default?
Weimar Germany, Here We Come!
These are all symptoms though. This is not the problem. They are mere symptoms of the disease, the rot of our soul. The nations soul has been rotted out.
Eventually the world will realize that the U.S. deficit and debt are beyond the capacity of this U.S. government to bring under control.
At that point, the ratings agencies and world markets will begin to treat the U.S. debt the way they treat the debts of Italy and Spain.
As soon as interest rates rise the deficit-debt will explode…and it will be all over for America.
I think the CBO’s report is ridiculously optimistic. The situation is much worse than they are willing to admit.
There would be a Revolution in this country if they put out the real numbers and accurate projections.
This letter has been long enough…