Monday, February 15, 2010

Mounting debt points to dire consequences ahead

We learned last week that the Social Security system is finally paying out more each year than it is taking in. As a result of Carter raising Social Security taxes in the 70s, the Social Security system has been taking in more money than it was paying out over the last 30 years. Of course, the money wasn't being saved for a rainy day. Instead, the kleptomaniac politicians pilfered it to pay off special interests, including big agribusinesses, Wall Street Banksters, and other large corporations who don't want to compete in the market; leftist "community organizers" like Acorn; government union bosses; corrupt university scientists studying "climate change"; welfare queens; and an endless parade of other leeches. The politicians' theft of the Social Security surpluses masked the true magnitude of annual budget deficits for more than 30 years. Now those surpluses are gone.

Government economists predict that even when (if?) we come out of this recession, the growing demands of the baby boomers on Social Security and Medicare will force the debt to keep piling up.

Honest people have been warning about entitlement spending for more than 30 years. For a long time, nothing was done to reform anything because every time someone tried to tell the truth the left would demagogue the issue, accusing the reformers of being heartless sadists who wanted to throw grandma into the snow without her shawl.

To make matters worse, the last two knuckleheads in the Oval Office have made the situation even worse. George Bush created the first new entitlement since LBJ (a costly prescription drug program for the elderly). Not to be outdone, Obama created a $1 trillion "stimulus" bill that failed to stimulate anything except the salivary glads of power hungry politicians. He also proposed (and hopefully has failed) to expand government healthcare entitlements from 50% of healthcare spending today to 100%.

Given the endless orgy of spending, government economists predict that interest on the debt will gobble up a whopping 80% of all federal revenues by 2020. EIGHTY PERCENT. There won't be any money left to do anything else.

We're not going to be able to just switch out the Congress and make a few tweaks to the system like we did in 94. It's too late for that. Given that the politicians are too corrupt and cowardly to make real changes, we are looking a a grim future ahead.

Mark my words, one or more of these three things WILL happen long before 2020:

A.) The government will undertake a massive tax increase (probably in the form of a Value Added Tax) that will cripple the economy even further and decimate middle class living standards.

B.) The government will create a hyperinflation to pay off the debt with worthless dollars, and wipe out what remains of middle class savings and investment.

C.) The government will default on its debt and collapse the global economy.

All empires come to an end. Thanks to corrupt politicians, lobbyists, and Wall Street bankstes,the post WWII American empire may be next. That's not necessarily a bad thing. It all depends on what comes next.

One path points us in the direction of freedom. It requires that we stand up to the federal government and reassert our rights with state nullification of federal laws (which is already happening in a few states with regards to gun control), a constitutional amendment that strictly limits federal power (including closing the "interstate commerce clause" loop hole, which has been used by the politicians to get their grubby little fingers into every aspect of our lives), repeal of the 16th and 17th amendments (which are the root cause of our problems), and potentially secession, if need be.

The other path -- of more government spending and debt -- could very easily end up with a strong man in charge of the country. Remember, the hyperinflation in Germany directly led to the ascension of Der F├╝hrer. That's the last thing we need.

We're on an uncharted course, at least for America. But we can learn from history and the mistakes that other countries have made. Hell, we can learn from the mistakes that other countries are making TODAY, namely the PIGS -- Portugal, Ireland, Greece, and Spain. Frankly, the U.S. situation is about as dire as theirs in terms of debt to GDP ratio. The only difference is that the U.S. is such a large and important country that it will take longer before our day of reckoning arrives. Make no mistake, it will arrive, and when it does it will be even worse than theirs because there will be no one left to bail us out.

It's long past time to learn from history and get our fiscal house in order. The magic question is whether or not we will learn.


Anonymous said...

It makes me wonder what, if anything, U.S. citizens can do to prepare for the turbulents ahead. Like you say, the trouble seems inevitable.

jwpegler said...

Three things:

#1. Stock up on food and water. If the currency collapses, supply chains may be disrupted, etc. and you'll need something to eat in the interim.

#2. Buy some silver coins. Again, if the currency collapses silver and gold will come in very handy. But, gold coins are just too expense for buying groceries and gas.

#3. I was pumping gas at my dad's gas station during the Arab oil embargo. (I was 13 years old). Mobile cut my dad's gas supply by 40% per month. So, my dad rationed gas to 10 gallons per visit so he could stay open the entire month and serve his regular customers. People turned ugly, including adults threatening me (a 13 old) with tire irons and baseball bats if I didn't fill up their tanks. So, another thing you'll need to prepare for a crises is a gun in your house.