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Budgeting 201: An Immediate Debt Crisis
Natural Born Conservative ^ | March 20, 2013 | Larry Walker II

Posted on 03/19/2013 10:50:33 PM PDT by NaturalBornConservative


USA vs. Cyprus: Gross Government Debt to GDP

- By: Larry Walker, II -

According to Speaker of the House John Boehner, “We do not have an immediate debt crisis.” No, then what would you call it? Seems to me it was immediate in 1995, and again in 2008, so what is it now? Are we just screwed? And according to Barack Obama, “We don’t have an immediate crisis in terms of debt. In fact, for the next 10 years, it’s gonna be in a sustainable place.” Yeah, what place is that, Wonderland? Have you people lost your minds? The chart below is from data published by the International Monetary Fund in its World Economic Outlook Database, October 2012. Based on what's happening in Cyprus, for some reason I don't believe either of them.

We had an immediate debt crisis in 1995 when our debt-to-GDP ratio reached 71%, insomuch that the government was shut down. And another in 2008 when it reached 76%, just before all hell broke loose. And now suddenly, as gross U.S. debt has surged beyond 100% of GDP, the problem is no longer immediate. If the debt isn't an immediate problem, when will it become one? Let me answer that for you.

The debt will become an immediate crisis when our economy inevitably dips into recession, a phenomenon which has occurred historically about once every 5 years since World War II. In fact, recession is exactly what's happening in Cyprus right now. But surely recession will never reoccur in the U.S., because government fixed that problem once and for all, right? I mean it cost us around $6.7 trillion over the last four years, but the problem is solved, right? With GDP surging at a robust growth rate of 0.1% in the 4th Quarter of 2012, how can our government possibly be wrong? Oh give me a break!

I believe part of what exacerbated the crisis of 2008 was an excessive amount of government debt. So what do you think is going to happen with our debt hovering above 100% of GDP, as the next crisis hits? Is the U.S. government prepared for another recession? Is there anything left in the tank? It sure doesn't look like it. Well, we're not going sit around and let the government continue to tax us to death, and we're definitely not going for the unlawful seizure of our money and property, so I suggest you government guys get your act together and get serious about your spending problem, and that means now.

Instead of loosening standards and letting everyone who wants to – go on disability, welfare and food stamps; granting any illegal alien who desires – a free pass; and subsidizing any and everyone's health insurance bill, while the other half of us and our grandchildren get stuck with the bill, now is the time to tighten standards and cut the slack. The sequester is right! Reducing the size of government is right!

Government needs to learn how to say, “No”. It should be, ‘Sorry, you're going to have to go back to work, and you're going to have to go back to your own country, and you're going to have to chip in on taxes, because we can't have 50% of the populace taking care of everyone else.’ If our government doesn't learn how to say no, it's going to destroy this nation and along with it our freedom. Yes, the debt is an immediate crisis, and it is an imminent threat to the survival of the Republic.

The chart above is from the Federal Reserve Bank of St. Louis. I'll ask again. Does this look like it might be an immediate crisis, or just a tiny little problem years and years from now? It sure looks immediate to me, but maybe I'm just a bit more focused on surviving the unknowns, than sitting around fooling myself into thinking everything is going to be rosy ten years from now, if I just fold my hands, play a little more golf, and trust that someone else will handle it for me. Yeah, just like Cyprus, right? It's time to stop playing politics and face reality.

References:

My Data - USA vs. Cyprus: Debt to GDP

IMF: World Economic Outlook Database, October 2012

Related:

Budgeting 101: A Balanced Approach

What Does Sequestration Mean To You?

From AAA to AA- in Four Years

Uncorrelated: GDP and National Debt

#Debt


TOPICS: Business/Economy; Government; Politics; Society
KEYWORDS: crisis; debt; deficit; government

1 posted on 03/19/2013 10:50:33 PM PDT by NaturalBornConservative
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To: NaturalBornConservative

That picture is better than a thousand words.


2 posted on 03/19/2013 10:56:37 PM PDT by entropy12 (The republic is doomed cuz people have figured out they can get free stuff by voting democrats)
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To: NaturalBornConservative

Good article. Don’t worry, the media is all over this...NOT!


3 posted on 03/19/2013 10:59:56 PM PDT by winner3000
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To: NaturalBornConservative

Thanks for putting up this article. Boehner made me want to tear my hair out!

Each time the Fed stopped QE1, QE2 and Twist, the stock market tanked and now we are on QE “Infinity” with the Fed buying $40 billion in mortgage debt each month and $40 billion or half of the US Treasury deficit EACH MONTH!

The Fed will only stop printing money when unemployment falls below 6.5%, but what if POTUS BARRY and his socialist clowns have so crippled capitalist incentives to invest that unemployment turns around and goes up as Obamacare crushes the life out of the economy in 2014? What will the Fed do then other than to double down and print even more!


4 posted on 03/19/2013 11:16:22 PM PDT by Seizethecarp (Defend aircraft from "runway kill zone" mini-drone helicopter swarm attacks: www.runwaykillzone.com)
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To: entropy12

That’s just the public debt. Our “unfunded liabilities” are now approximately $120 trillion. I just don’t see how a $15 trillion economy could ever generate the kind of wealth needed to make good on $120 trillion in future obligations.

So I find myself agreeing with both Boehner and Obama. The crisis is not immediate right now — the crisis was immediate years ago already. And now it’s too late to fix it in any controlled, systematic way. A whole lotta people aren’t going to get anything near what they were promised, either through draconian cuts or bankruptcy.


5 posted on 03/19/2013 11:16:59 PM PDT by kevao (.)
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To: kevao

Right you are. Politicians only care about the next election. Unfunded liabilities are many election cycles away so they don’t give a damn.

We need to expand supply of young workers drastically to have a chance to support the ageing population. Encourage immigration of “SKILLED” workers.


6 posted on 03/20/2013 1:01:25 AM PDT by entropy12 (The republic is doomed cuz people have figured out they can get free stuff by voting democrats)
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