Unsustainable Debt
Ouch.
It’s bad enough that Greece’s debt problems have rattled global financial markets. In the world’s largest economic and military power, there’s a far more serious debt dilemma.
For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario — a full recovery and a return to prerecession employment levels.
The government already has made so many promises to so many expanding “mandatory” programs. Just keeping these commitments, without major changes in taxing and spending, will lead to deficits that cannot be sustained.
Take Social Security, Medicare and other benefits. Add in interest payments on a national debt that now exceeds $12.3 trillion. It all will gobble up 80 percent of all federal revenues by 2020, government economists project.
That doesn’t leave room for much else. What’s left is the entire rest of the government, including military and homeland security spending, which has been protected and nurtured by the White House and Congress, regardless of the party in power.
The U.S. debt crisis also raises the question of how long the world’s leading power can remain its largest borrower.
The current spending levels are not sustainable. The big question is when. Is it 10 years? 20 years? 30 years? before it all collapses?
Unfortunately politicans are willing to keep kicking the can down the road until the road runs out.
Posted by .(JavaScript must be enabled to view this email address) on February 14, 2010 at 1848 hrs
Want to *really* worry about this stuff, and know something about financial markets?
Posted by .(JavaScript must be enabled to view this email address) on February 14, 2010 at 2028 hrs
The nice thing about owing debt in dollars is that we won’t default—they’ll just print enough dollars to pay everything off.
The problem comes after that, when our credit rating is ruined and we can’t borrow. Then life goes into the crapper. We’ll have generational war between those on “entitlement benefits” and those who need to support them.
ZeroHedge is fun, I agree.
“But now I want to come back as the bond market. You can intimidate everybody.” - James Carville, WSJ, 1993
Posted by .(JavaScript must be enabled to view this email address) on February 14, 2010 at 2105 hrs
nerdbert
Lol at that Carville quote.
I happen to think zero hedge is right. We’re screwed. I just don’t know if they’re correct on the timeframe. Hell, it’s going to suck no matter what. I’d rather it suck for me than my kids, let’s get it over with.
Posted by .(JavaScript must be enabled to view this email address) on February 14, 2010 at 2211 hrs
Has anyone asked Rick Kopatich, former figure head of the Greendale Tax-payers group about this? I am certain that he has a (dim)witty opinion on this.
I did hear that he retired though? Oh wait. He retired 20 years ago.
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 0012 hrs
Rick Kopatich would immediately identify that our nation has serious fiscal issues and that all of this spending is going to put heavy property tax burdens of the people of america.
Quite frankly, my wallet is empty. AND I PLAYED IN THE MAJOR LEAGUES. UGHHH!
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 0018 hrs
GMan, I figure we’ve got 5-10 years before it hits the fan. By that time what we’ve got now will look good in comparison.
If you look at the history of real-estate busts, it’s a minimum of 5-10 years before recovery occurs, usually 10 or more. That’s just because foreclosure, banks breaking, rebuilding reserves and capital, etc just take a long time to work out. So the economy is going to suck for a long time.
But if you look beyond the financial system it’s a pretty much of a perfect storm coming down the pike: a busted financial system that can’t recover quickly, extravagant spending by the government running massive deficits and financed by shipping our jobs overseas, collapsing infrastructure, and a demographic crunch as the boomers begin to depend on the government for support.
And this doesn’t even consider the internal dynamics of our largest creditor. That’s an unstable situation in China, with a surplus of young men without marriage prospects, an economy that has to keep growing at a ferocious rate just to keep the country politically stable, and an economy that’s geared towards exports at a time when importing economies are struggling.
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 0205 hrs
Check out:
http://www.startribune.com/opinion/commentary/84264862.html?elr=KArks:DCiU1PciUiD3aPc:_Yyc:aUU
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 0400 hrs
But if you look beyond the financial system it’s a pretty much of a perfect storm coming down the pike
And there is not a helluva a lot anybody can do about.
Gotta love those invisible hands.
Buckle up me hearties.
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 0941 hrs
The money isn’t going to be paid and government is going to get much smaller. It isn’t terribly complicated. The only question is whether we will not pay the future debts by inflating the currency to the point of worthlessness or by rationally deciding what to cut and what not to pay.
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 1219 hrs
It’s too bad that rational decision making is such a problem for politicians. Entitlement spending, interest on debt, and defense spending collectively comprise over three-fourths of federal spending. The only way to fix any problem is to be serious about how we deal with those elements. It might mean cutting some benefits, it might mean finding some new ways to pay for what’s left. But any sane person should recognize the benefit of finding a middle ground on these issues now instead of doing what politicians do, which is stake out entirely unworkable ideological positions for the amusement of extremist idiots who don’t understand that time really is of the essence.
Posted by Recess Supervisor on February 15, 2010 at 1256 hrs
The problem comes after that, when our credit rating is ruined and we can’t borrow. Then life goes into the crapper. We’ll have generational war between those on “entitlement benefits” and those who need to support them.
The generational war is here now. I know dozens of people in their twenties and thirties that support the abolition of SS and Medicare…. Just eliminating those two programs would allow us to repay our national debt and remain financially solvent in perpetuity. The problem is that our nations largest generation, and also the most needy are now entering retirement age, and since they are so used to politicians catering to their whims, there is little chance we’ll see any change on this front until the economy completely collapses.
We will not be able to continue monitizing our debt, india and china will catch on (and soon) to the fact that the value of the debt they own is decreasing as the dollar becomes more and more worthless.
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 1658 hrs
But any sane person should recognize the benefit of finding a middle ground on these issues now instead of doing what politicians do, which is stake out entirely unworkable ideological positions for the amusement of extremist idiots who don’t understand that time really is of the essence
Since the middle ground is occupied by the likes of Joe Liebermann and John McCain, I would suggest we need to get a little bit right of the middle. The middle ground won’t help this country avoid financial catastrophe, we need dire cuts, and possibly tax increases (for everyone, rich and poor) to repay our debts and return to sound footing. Social Security needs to be privatized, or eliminated. Medicare needs to be eliminated. This country needs to re-learn how to handle money…. Right now.
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 1703 hrs
Gotta love those invisible hands
It wasn’t the free market system that got us here…. Supply and demand had nothing to do with the collapse.
It was the very visible hands of Barny Frank, Chris Dodd, Bill Clinton, George W. Bush, Barack Obama, and hundreds of others that buried us.
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 1707 hrs
(for everyone, rich and poor)
I am quoting myself because I want to be sure that I am clear. Right now we have gotten ourselves to a situation where 1/2 of this country is paying for the benefits of not only our population, but the benefits of millions of illegal aliens, and millions in foreign nations. We have reached a point where my tax dollars are going to pay the retirement benefits of 1 blue haired lady in Boca Raton. We have gotten to the point where half of our population PAYS NO FEDERAL TAXES, how can we be honest with ourselves and expect this country to continue to function when we are using our tax code as a social welfare program.
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 1713 hrs
Oh gee, look at that. Not only just one Republican in his list but so is Clinton, who left office with a $300B surplus.
Oh BTW, where did
We have gotten to the point where half of our population PAYS NO FEDERAL TAXES, how can we be honest with ourselves and expect this country to continue to function when we are using our tax code as a social welfare program.
come from?
Posted by .(JavaScript must be enabled to view this email address) on February 15, 2010 at 2158 hrs
Oh gee, look at that. Not only just one Republican in his list but so is Clinton, who left office with a $300B surplus.
$300B imaginary surplus… Bill Clinton was involved in creating an environment that compelled banks to make loans to people who were not worthy of them. The credit crisis is a result of centralized planning, not the invisible hands of supply and demand.
Keith, I could have sat here for hours typing out names of democrats and republicans who have paved the road to where we are now, you’ll note that I left out the two who are most directly responsible for the programs that are causing much of our financial hardship, FDR and LBJ. Ronald Reagan did nothing to stop the growth of entitlement spending, Richard Nixon was a clown, the Republican revolution of ‘94 resulted in nothing but welfare reform (which was dismantled by Barack Obama).
Oh BTW, where did
We have gotten to the point where half of our population PAYS NO FEDERAL TAXES, how can we be honest with ourselves and expect this country to continue to function when we are using our tax code as a social welfare program.
come from?
Progressives who have insisted that having ALL AMERICANS of any income pay taxes is “regressive”. I can only figure that a marxist like you is trying to suggest that the tax relief signed into law by GWB shifted the tax burden to the middle class, a lie, but in truth the GWB tax policies increased government revenue. The pieces of Bush era policy that resulted in yearly deficits were a couple of wars.
But, ah, what the hell, lets ignore the mistakes of past big spending presidents and go for broke. Lets raise the debt ceiling to 100% of GDP, lets start monetizing debt payments, lets introduce the largest federal budget in the history of the United States, lets throw a trillion dollars down a deep dark hole, light it on fire and call it a stimulus package. And then, when the CBO and every credible economist is saying that a recession that should have lasted 18-24 months is going to last upwards of 5-7 years, lets push forward with cap and trade legislation that will force even more of our high-wage low skill jobs overseas….. Yeah Keith, that sure sounds like the answer to me…
Posted by .(JavaScript must be enabled to view this email address) on February 16, 2010 at 0701 hrs
Doug, you couldn’t have said it any better! I haven’t paid income taxes in two decades but I get benefits from my wife who works three jobs!
As a former CFO of a plastics corporation I know how to crunch numbers. I’m like a cat! Obama’s socialist reforms make me ill. I can’t even get REM sleep anymore! I didn’t work 15 years of my life to let other unemployed “people” live off government subsidized welfare!
Posted by .(JavaScript must be enabled to view this email address) on February 20, 2010 at 1351 hrs
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