Posted on 08/29/2015 5:05:03 AM PDT by Kaslin
Source: Source information located at the bottom of column.
First the good news. The federal government’s tax receipts are coming in at a rate somewhat higher than what was expected a few months ago. That means a shut-down-the-government debt limit stalemate will be pushed back until November or December. It also means that the federal debt will actually decline a bit this year.
Now for the bad news. We are experiencing the calm before the storm. The Congressional Budget Office reported Tuesday that although our fiscal situation is improving, by 2018 we will snap back to swelling deficits and unsustainable debt. As reported by the Washington Times:
Debt held by the public … will fluctuate for a few years before beginning a steady climb … and nearing 77 percent [of GDP] in 2025. Those are levels unseen since 1950, when the country was getting out from under the burden of World War II.
In fact the CBO predicts that by 2040 the federal debt will reach 100 percent of national income – a point regarded as a clear danger zone based on recent economic studies.
The latest CBO report comes only a few days after New York Times columnist Paul Krugman penned a column entitled “Debt is Good.” What? Was that a misprint? No, Krugman’s entire column was an encomium to debt.
To be fair, deep in the middle of an otherwise hard to believe stream of consciousness, Krugman did make a decent point:
[I]ssuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation.
Here’s the problem with that. Going forward, we are not going to be borrowing money in order to invest in projects that will produce social services far into the future. We are going to be borrowing money to pay for current consumption. Everyone can understand borrowing money to finance the purchase of a house or a car. But can you imagine borrowing money so you can eat out at nice restaurants more often? That’s a good way to understand what the federal government is doing.
We are looking forward to mounting debt because in Social Security, Medicare, Disability Insurance and other entitlement programs, we have promised more than we can afford given expected taxes and premiums. According to the latest reports from the Social Security and Medicare trustees, the unfunded liability in both programs is $72 trillion, looking indefinitely into the future. (See the table.) Based on more realistic accounting, the actual obligation is in excess of $100 trillion – about six times the size of our entire economy.
If we had responsible social insurance programs, we would have $100 trillion in the bank, earning interest. But we don’t. And the fact that we don’t means we are in trouble.
How does that affect federal government finances today? In a pay-as-you-go system what matters most is cash flow. Currently, Social Security, Medicare and Disability Insurance are all paying out more in benefits than they are collecting in dedicated taxes and premiums. We are using about one in every seven general revenue dollars to cover these deficits. By 2020, we will need more than one in five. By 2030, we will need about one in three.
That implies that in order to fund Social Security and Medicare benefits at their current levels and at the same time balance the budget, in just five years the federal government will need to stop doing about one out of every five other things it is currently doing. In just 15 years, the government will need to stop doing about one out of three other things it is currently doing. Clearly, elderly entitlements are on a course to crowd out all other federal programs.
One way to think about how much debt we have accumulated is to imagine closing down Social Security and Medicare – the way one might close down a pension fund. That is, imagine that we stopped collecting taxes tomorrow and agreed to pay everyone the benefits they have earned so far. How much would we owe? Answer: $52 trillion – more than three times the size of our economy!
Graphic source: Calculations by Thomas Saving and Andrew Rettenmaier based on the 2015 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds and the 2015 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds.
BIG GOVERNMENT IS CRONY SOCIALISM
Socialism Is Legal Plunder - Bastiat
It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder. - Bastiat
6. But the grand nostrum will be a public debt...
7. It must not be forgotten that the members of the legislative body are to have a deep stake in the game. This is an essential point, and happily is attended with no difficulty. A sufficient number, properly disposed, can alternately legislate and speculate, and speculate and legislate, and buy and sell, and sell and buy, until a due portion of the property of their constituents has passed into their hands to give them an interest against their constituents…
10. “Divide and govern”…
11. As soon as sufficient progress in the intended change shall have been made, and the public mind duly prepared according to the rules already laid down, it will be proper to venture on another and a bolder step toward a removal of the constitutional landmarks.
Rules for Changing a Limited Republican Government into an Unlimited Hereditary One
http://www.constitution.org/cmt/freneau/republic2monarchy.htm
Debates in the House of Representatives on the First Report on Public Credit 9–18 February 1790
James Jackson (Ga.)
But it is doubted with me whether a permanent funded debt is beneficial or not to any country.
The same effect must be produced that has taken place in other nations; it must either bring on a national bankruptcy or annihilate her existence as an independent empire. Hence I contend, sir, that a funding system, in this country, will be highly dangerous to the welfare of the republic; it may, for a moment, raise our credit and increase the circulation, by multiplying a new species of currency; but it must, in times afterward, settle upon our posterity a burthen which they can neither bear nor relieve themselves from. It will establish a precedent in America that may, and in all probability will, be pursued by the sovereign authority until it brings upon us that ruin which it has never failed to bring, or is inevitably bringing, upon all the nations of the earth who have had the temerity to make the experiment.
http://oll.libertyfund.org/titles/875
Why relegate our children and grandchildren (and their grandchildren) to becoming debt slaves of socialists?
DEFUND socialist collectives, foreign and domestic.
DEPOPULATE socialists from the body politic.
live - free - republic
When Obama was elected in 2008, many schizophrenics sniffed the air and decided it was right to stop their medication. Their time had arrived.
The last time the national debt decreased from one fiscal year was the year ending 12/31/1960, Dwight Eisenhower's last year as President. I think the author needs to fact-check.
Earth to Paul Krugman and The New York Times: Debt Is Not Good
Especially when the guys who loaned you the money want it back... and you can’t pay them back.
Nope... not a good thing at all.
Re: “Debt Is Not Good”
Slightly off topic.....
I also don’t understand why the Federal Reserve has set a 2% per year “target” for inflation.
Or, why they suggest that a 0% or 1% rate might be harmful to the economy.
Or, why they suggest that a small rate of deflation might be harmful to the economy, if that deflation is caused by an oversupply of goods, or if that deflation is caused by significant gains in quality or productivity.
A 2% per year inflation rate means that our money loses one half of its value every 36 years.
Unless the Fed is deliberately trying to harm the people who invest in US Treasury debt, how can they take the view that any inflation is a “good” thing for the economy?
See mail
Not really off topic. The Fed and the politicians know that inflation is one way to erase debt, slowly or not so slowly, depending on the level of inflation. Of course there is no such thing as a steady rate of inflation, 2% or otherwise. Inflation will depend on fluctuating economic factors but also inflation psychology. Part of the reason the Fed wants inflation is to stimulate consumption. When they inevitably go too far the unwashed will unload dollars and inflation will shoot up.
How long will it take for the first Trillion, if we could pay back one dollar every second? You will never guess, have to have a really big calculator, 33,000 years.
The beast of baseline budgeting raises its ugly head. Since we are nowhere close to having a balanced budget, I think the author should say that the federal debt will increase by a slightly less obscene amount than originally planned for the year.
We heard this about the shovel-ready porkulus, and we've spent the equivalent of a porkulus every year since. And still they trot out this meme.
I have begun to doubt that.
I think the Internet is the great equalizer - specifically for price discovery and quality comparison.
I think we have reached the point where just a small core of highly informed consumers can move the price needle down, on any widely available product, internationally.
Custom products and luxury goods are somewhat resistant, but they are not price invulnerable any longer.
And - slightly off topic again - I am disgusted with the way the Federal Reserve completely ignores the deflationary impact of massive legal immigration on low skill wages and on mid-level wages in various technology and science sectors.
But, mostly, I am disgusted because inflationary policies, as you point out, are designed primarily, and immorally in my opinion, to erase sovereign debt.
I think you are generally correct that raising prices is more difficult with informed consumers. There might not be general inflation psychology like I remember from the late 70’s but there could be some misinformation of sorts passed around creating various bubbles. People might start to unload dollars for some things that might go up like a beanie baby. Perhaps Amazon will become more of a bazaar.
Certainly NOT rails.
Roads? Arguable
Water? MAybe But certaibnly not the EPA power grab.
Other? HA.
And then there is the inflation of the Stock Market.
“...many schizophrenics sniffed the air and decided it was right to stop their medication...”
Progressives are by definition psychotics and medication or not, they will always be psychotic, junior-high-school punks who will never be disabused of their delusions.
IMHO
It depends on what you mean by "good".
Not to go all Lenin on y'all, but the question of debt resolves to "кто/ кого?" or "who/whom?"
If you get to replace gold and silver money with credit you issue, and if you can book the debts of others as assets, and you can use those theoretical assets to purchase physical assets for yourself, debt is very good indeed.
“It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder. -Bastiat”
Progressives have not converted the law, they’ve subverted it with all the sneakiness, lies, trickery and deceit they could muster and converted the IRS into an instrument for taking what does not belong to them.
Part of the Fifth Amendment states: “No person shall be...deprived of life, liberty, or property without due process of law.
Progressives have turned due process of law into what the opinion of the electorate is at the moment and used it to make “tax policy” that takes the property of others on a whim rather than lawful, due process.
IMHO
Agreed (both posts). The lie is the weapon used most often by the criminal. Socialists are criminals, totalitarians conniving for control. Lies…control - as many aspects of life that they can get away with - while they plunder (tax and spend) us, our children, our grandchildren, our grandchildren’s grandchildren, etc., etc.
You would use the law to oppose socialism? But it is upon the law that socialism itself relies. Socialists desire to practice legal plunder, not illegal plunder. Socialists, like all other monopolists, desire to make the law their own weapon. And when once the law is on the side of socialism, how can it be used against socialism? For when plunder is abetted by the law, it does not fear your courts, your gendarmes, and your prisons. Rather, it may call upon them for help. - Bastiat
“He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.” - list of grievances, Declaration of Independence
Witness history. Witness current events home and abroad.
“...list of grievances, Declaration of Independence.”
The revolution by scu*bag Progressives is running apace with the consent of millions in the electorate.
Absolutely amazing, that the blood legacy left by so many veterans, both alive and dead, has been frittered away and subverted by so many psychotic, self-centered punks.
What they’re creating is the impetus to list another set of grievances, a couple of hundred years later, of the same abuses by a foreign power that eschews the Constitution and American Principles while its office holders swear to uphold the Constitution of the United States.
So absolutely amazing.
IMHO
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