June 4th, 2009 | 
Author: America’s fiscal recklessness has not only continued for decades, but has also been growing for years, at an ever increasing rate.
What’s more, the present economic crisis and administration have added superchargers to the process, and much as this government might wish to believe the contrary, the country won’t economically be able to survive the continued deficit spending.
According to estimates, by 2012, the federal debt will be more than $15 trillion, and the annual interest will probably be between $1 trillion and $1.7 trillion!
The reason that there is such a big gap between the above figures is that the predictions depend on whether long bonds return to about 3.5% or remain at around recent rates of 6-7%.
Deficits are expected to average about $1 trillion a year, which would mean about $22 trillion by 2019!
Yearly interest payments would then be more than $2 trillion!
OK, that was horrible news, so let’s have the better news.
That was the good news, and perhaps the most optimistic news!
The above numbers assume the world, and China in particular, will continue to buy our Treasury notes at ‘reasonable’ rates.
Just last week however, we got a little glimpse of what the future might hold …
Ten-year U.S. Treasury bond yields shot up by sixty basis points, because of soft demand, and Standard & Poor’s warned of a possible ratings downgrade of British bonds.
The predicted $22 trillion in debt, supported by purchasable bonds, that was mentioned above, also assumes that our economy will recover this year, and that we will then have continued steady economic growth.
Who believes that?
If however the government continues to borrow huge amounts of money, and the administration’s health plans will supposedly add a currently unfunded $1.5 trillion per decade, then there will be less and less money available to the private sector, which will mean less investment.
Less investment equals less growth, or perhaps even negative growth.
The optimistic figures also assume that defense spending will decrease as a percentage of the federal budget, and if you believe that then you probably believe in Santa Claus too!
Do you believe, that if America’s overall budget grows by 75% that its defense budget will only grow by 17% ?
If “yes”, then you believe in peace on earth, and good will to all men, and that would indeed be wonderful.
There are presently four workers for every retiree, but as baby boomers retire that figure will be reduced to two workers for ever retiree!
How will the shrinking number of workers support the growing number of retirees?
Higher taxes of course!
Eight years from now, that’s in 2017, the Medicare trust fund will be depleted!
Is there a solution?
Possibly, but it would require the opposite of deficit spending, bail-outs and government funded healthcare.
Professor Alexander Fraser Tyler, a Scottish historian who in 1787, writing about the decline and fall of the Athenian Republic over two thousand years before, said:
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.”
“The average age of the world’s greatest civilizations has been 200 years. These nations have progressed through this sequence:
From bondage to spiritual faith
From spiritual faith to great courage
From courage to liberty
From liberty to abundance
From abundance to complacency
From complacency to apathy
From apathy to dependence
From dependence back again into bondage”.
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