Observations on life

Ignoring warnings  🤑 business as usual. How does any politician take credit for accomplishments? America is drowning in debt while poverty rates are no better than decades ago. 

The following was a warning. It was written in December 2010.  It was ignored then and since then by this Administration and this Congress as they have ignored the warnings contained in the Social Security Trustees Reports for years. One result is that the national debt is now equal to $60,000 per citizen with more being added every day. And yet, there are those who see no problem and want more of the same. 

Those who like to promote the “accomplishment” of the last eight years should read this, look at our debt and its long-term consequences and reevaluate their definition of accomplishment.

All the tough problems have been ignored and instead we hear about more programs, expanding Social Security and raising the minimum wage or paid leave.  Clinton wants to eliminate poverty; using a different approach I hope. 😉 SEE CHART BELOW

Our nation is on an unsustainable fiscal path. Spending is rising and revenues are falling short, requiring the government to borrow huge sums each year to make up the difference. We face staggering deficits. In 2010, federal spending was nearly 24 percent of Gross Domestic Product (GDP), the value of all goods and services produced in the economy. Only during World War II was federal spending a larger part of the economy. Tax revenues stood at 15 percent of GDP this year, the lowest level since 1950. The gap between spending and revenue – the budget deficit – was just under nine percent of GDP.

Since the last time our budget was balanced in 2001, the federal debt has increased dramatically, rising from 33 percent of GDP to 62 percent of GDP in 2010. The escalation was driven in large part by two wars and a slew of fiscally irresponsible policies, along with a deep economic downturn. We have arrived at the moment of truth, and neither political party is without blame.

Economic recovery will improve the deficit situation in the short run because revenues will rise as people go back to work, and money spent on the social safety net will decline as fewer people are forced to rely on it. But even after the economy recovers, federal spending is projected to increase faster than revenues, so the government will have to continue borrowing money to spend. The Congressional Budget Office (CBO) projects if we continue on our current course, deficits will remain high throughout the rest of this decade and beyond, and debt will spiral ever higher, reaching 90 percent of GDP in 2020.

Over the long run, as the baby boomers retire and health care costs continue to grow, the situation will become far worse. By 2025 revenue will be able to finance only interest payments, Medicare, Medicaid, and Social Security. Every other federal government activity – from national defense and homeland security to transportation and energy – will have to be paid for with borrowed money. Debt held by the public will outstrip the entire American economy, growing to as much as 185 percent of GDP by 2035. Interest on the debt could rise to nearly $1 trillion by 2020. These mandatory payments – which buy absolutely no goods or services – will squeeze out funding for all other priorities.

Federal debt this high is unsustainable. It will drive up interest rates for all borrowers – businesses and individuals – and curtail economic growth by crowding out private investment. By making it more expensive for entrepreneurs and businesses to raise capital, innovate, and create jobs, rising debt could reduce per-capita GDP, each American’s share of the nation’s economy, by as much as 15 percent by 2035.

Rising debt will also hamstring the government, depriving it of the resources needed to respond to future crises and invest in other priorities. Deficit spending is often used to respond to short- term financial “emergency” needs such as wars or recessions. If our national debt grows higher, the federal government may even have difficulty borrowing funds at an affordable interest rate, preventing it from effectively responding.

Large debt will put America at risk by exposing it to foreign creditors. They currently own more than half our public debt, and the interest we pay them reduces our own standard of living. The single largest foreign holder of our debt is China, a nation that may not share our country’s aspirations and strategic interests. In a worst-case scenario, investors could lose confidence that our nation is able or willing to repay its loans – possibly triggering a debt crisis that would force the government to implement the most stringent of austerity measures.

Predicting the precise level of public debt that would trigger such a crisis is difficult, but a key factor may be whether the debt has been stabilized as a share of the economy or if it continues to rise. Investors, reluctant to risk throwing good money after bad, are sure to be far more concerned about rising debt than stable debt. In a recent briefing on the risk of a fiscal crisis, CBO explained that while “there is no identifiable tipping point of debt relative to GDP indicating that a crisis is likely or imminent,” the U.S. debt-to-GDP ratio is “climbing into unfamiliar territory” and “the higher the debt, the greater the risk of such a crisis.”1

If we do not act soon to reassure the markets, the risk of a crisis will increase, and the options available to avert or remedy the crisis will both narrow and become more stringent. If we wait ten years, CBO projects our economy could shrink by as much as 2 percent, and spending cuts and tax increases needed to plug the hole could nearly double what is needed today. Continued inaction is not a viable option, and not an acceptable course for a responsible government.

REPORT OF THE NATIONAL COMMISSION ON FISCAL RESPONSIBILITY AND REFORM

Do you see much progress for all the promises and the money spent? Will more of the same “solutions” create better results?

This is Progress?

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Categories: Observations on life

1 reply »

  1. When looking at poverty, you have to look at subgroups – children, elderly (over age 65), etc. What you will see is that poverty among those age 65+ has been significantly reduced, not so with regard to children. Why no progress on kids? Something the government can’t fix, only parents can – it is called childbirth out of wedlock.

    The proportion of births to unmarried women has increased greatly in recent decades, rising from 5% (1960), to 32% (1995) to 41% (2010) and leveled off from there. Today, it is 40.3% (2015). However, by ethnic/race, the percentages vary greatly:
    – Among blacks, the percentage is 70.9%.
    – Among Hispanics, the percentage is 52.9%.
    – Among non-Hispanic whites, the percentage is 29.2%.

    Children born to unmarried mothers are more likely to grow up in a single-parent household, experience unstable living arrangements, live in poverty, and have socio-emotional problems. As these children reach adolescence, they are more likely to have low educational attainment, engage in sex at a younger age, and have a birth outside of marriage. As young adults, children born outside of marriage are more likely to be idle (neither in school nor employed), have lower occupational status and income, and have more troubled marriages and more divorces than those born to married parents.

    Women who give birth outside of marriage tend to be more disadvantaged than their married counterparts, both before and after the birth. Unmarried mothers generally have lower incomes, lower education levels, and are more likely to be dependent on welfare assistance compared with married mothers. Women who have a non-marital birth also tend to fare worse than childless single women; for example, they have reduced marriage prospects compared with single women without children.

    So, if we want to change that trend, and return to the 1960’s, we need to first change parents, and our American culture. Suggestions? Behavioral economics would suggest that we start by requiring individuals obtain a license and pay fees before having sex (or penalties for non-compliance). Yes, something as simple as a “commitment bond” concept, a requirement that you complete that education showing the “sentence” you are giving yourself and your child, that you commit not to have children prior to marriage, with your parents at your side, should be sufficient to reduce the rate of childbirth outside of marriage. Sure, some will break that bond, but, I believe you would be amazed at the impact of something that simple and non-invasive. Next step would be to deny Medicaid and other forms of public assistance to those having children out of wedlock. After that, well, I’ll leave it to you.

    Regarding all of the rest of the crap, you have identified the problem many, many times. Too many Americans are willing to be “bought off” for their vote by promises of government acquired taking from others to provide goodies to you. Simply, the only option is to take away from the government their ability to raise revenue, and give it to those paying the taxes. When people who will pay the tax vote for the government program it will fund, such a commitment requirement should be enough to curtail excesses.

    Who among you would vote for money to pass along to the Commerce Department, The Education Department, foreign aid to Palestinians including those whose peers slaughter American citizens, a Vanderbuilt business graduate student who was a West Point graduate and a 13 year old girl in her bed, then celebrate the killers.

    See:
    http://www.usatoday.com/story/news/world/2016/03/08/american-dies-israel-stabbing-attack/81489762/

    http://www.foxnews.com/world/2016/06/30/israeli-girl-13-stabbed-to-death-in-bedroom-by-palestinian-attacker.html

    Yet, when I contacted my Congressman and Senators, they just ho hummed it. Since the establishment of limited Palestinian self-rule in the West Bank and Gaza Strip in the mid-1990s, the U.S. government has committed more than $5 billion in bilateral economic and non-lethal security assistance to the Palestinians, who are among the world’s largest per capita recipients of international foreign aid. FY 2017 support is estimated to be $327.6MM for the annual Economic Support Fund and $35 MM for Annual International Narcotics Control and Law Enforcement. I say, cut ‘em off until they change their tune.

    You want easy targets of “waste, fraud and abuse” – go to the “Pig Book” – you can easily find $5 – $10B in annual reductions to our deficit. Not much, relative to the budget and the annual deficit (still at about one half a trillion a year), but it IS a start.

    See:

    http://www.cagw.org/sites/default/files/pdf/CAGW_PigBook_2016_Online.pdf

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