The Top-10 Budget-Deficit Time Bombs

If you’ve read the press releases being put out by Washington these days, you’d be convinced that the big bad Bush-caused recession of 2008-2009 is now safely beyond us.

Tain’t so.

If fact, the hoary mess which began under the last days of Bush & Democrats  guarantees that Obama & Democrats will continue to take us down the rat-hole of national bankruptcy.

Here’s why.

The problem dates back a long way – to the "New Deal" days of Franklin Roosevelt and the "Great Society" days of Lyndon Johnson.  Big spenders both: of your money.

In 1933-1936 FDR created his big wave of so-called "progressive" legislation.  The Agricultural Adjustment Act became law in May, 1933.  The AAA paid farmers to not grow food.  It still does.  

In 1935, the Social Security Act created Washington’s Ponzi scheme, misrepresented to the voters as an insurance retirement program.  It promised to invest worker payments in safe securities to pay for their future retirement.  

Instead, SS payments – really taxes – are paid into the Federal Treasury and spent that year.  The Government then issues Treasury Notes (IOU’s) to a mythical Social Security "Trust Fund".  In other words, the Government’s left pocket pays its right pocket with IOU’s from your pocket.  

In 1945, there were 42 workers for each SS beneficiary.  By 2010, only 3 workers are left to support each beneficiary.  By 2035 only two will be  left.  Let’s hope Tom and Dick will continue to pay Harry.  

Whadda you think?

You and I now owe $14 trillion to pay for future retirees entitled to receive Social Security.  

FDR did one good thing: his progressive neo-socialist administration and his Democrat Congress repealed the 18th Amendment (Prohibition) created by prior progressive "do-gooders" in Congress.  Prohibition made it illegal to sell – and drink – wine, beer, and hard alcohol.  

It also created the Mafia.  

Bad (stupid?) laws that run counter to people’s wishes always force the market to go underground.  A black market springs up to serve the demand.  In this case the booze was supplied by the mob.  Who’s serving the black market marijuana in the USA today?  Columbia and Mexican mafias.

In 1965, Lyndon Johnson created an even bigger Ponzi scheme, Medicare,

Like the Social Security cancer, Medicare seemed to be a "good idea" at the time – at least if you were a socialist.  The idea was similar.  Tax people during their working years to pay for 80% of their medical expenses after they turn 65.  Like Social Security, the money is actually spent in the year it is collected.   

So, we’re really taxing Peter to pay for Paul.  

You and I now owe $74 trillion for future medical bills of people 65 and older.

Lyndon Johnson didn’t stop with Medicare.  He also created the 1965 Higher Education Act which writes taxpayers’ checks to pay for college educations.  Then there was the National Endowment for the Arts which writes taxpayers’ checks to sponsor "art", and the 1967 Public Broadcasting Act which writes taxpayers’ checks to support PBS and NPR.  

Next, the progressive LBJ created the Transportation Department, which writes taxpayers’ checks to support unwanted rail projects.  Then came the boondoggle of using taxpayer checks to fund,and control local schools, ending a political taboo of nearly 2 centuries.    

Finally, Johnson & Co. created the so-called "War on Poverty" which has spent hundreds of billions of dollars of taxpayers’ money to eradicate poverty in the US.  Over the next 5 decades, poverty has risen nicely.  One might reasonably ask at this point whose side of this "war" is the federal government on?

In Jimmy Carter’s presidency, he and his Democrat Congress created the Department of Energy to eliminate being dominated by our enemies, including the Middle East.  Several hundred billions of dollars later, we’re energy independent.  Right?

Along the way, Carter also brokered the famous Middle East peace deal between Israel and  Egypt which solved all the Middle East’s problems.  Or not.  

Over 75 years, spendthrift Congresses have enacted law upon law to create more debt to pay for more "entitlements".

The result?  The national debt, run up by Washington but paid for out of IOU’s, now exceeds $14 trillion.  "Off-the-books" unfunded liabilities, like Social Security, Medicare and the Bush gift to baby boomers: the Medicare  prescription drug program, now total nearly $108 trillion.  .

Since the US GDP is about $15 trillion, it would take over 8 years of consuming the output of every business and every American to pay  off the national debt.  

Even then the Congress-created Federal Debt Cancer would still be growing beyond control.  For Congress, in their nefarious scheming has created not one but dozens of budget/deficit time bombs.

Here are the Top-10 time bombs now faithfully ticking away:

1.    Federal Budget Deficit Bomb.  The government is spending over $1.5 trillion more than it takes in each year.

2.    US Foreign Trade Bomb. The US imports more than $400 billion than it exports.  We’ve shipped our industrial manufacturing overseas and won’t allow our natural energy companies to tap into our own mainland fuel sources.

3.     Destruction of the US Dollar as the World’s Foreign Reserve.  Once the US dollar is no longer kept as reserve by foreign nations, GDP will fall by 1%.  This will cost us over $150 billion a year.

4.    Cheap Money Bomb.  By pushing down the interest rates to near-zero to "stimulate" the economy, the FED lowered the cost of government borrowing to 1%.   As interest rates rise, this cost shoots up.  When rates reach the normal range of 4-6%, 25% of the federal budget will be sucked up.  Washington will have to borrow even more just to keep even.  Meanwhile the treadmill is speeding up.  

5.    Global Real Estate Bomb.  US commercial real estate is in trouble.  It makes problems in the housing market look tiny.  $1.7 trillion in IOU’s are held by the banks, and defaults are now beginning.   As real estate prices fall, people sink "under water" in equity.  They can hold their breath for only so long. Then the banks take back unwanted property which they can’t easily sell.   Over 30% of houses in default are not even being put up for sale by the bank.  They are being left empty to decay.

6.    Consumer Debt Bomb.  Americans owe $16.7 trillion, mostly for home loans and credit cards.  But people are now saving more and that debt is falling.  That’s good, right?  Wrong.  Start saving more and spending drops.  That’s bad.  Washington has encouraged multinational firms to move manufacturing overseas; US plants are closing left and right.  But 70% of our economy is driven by the consumer.  The solution is simple: make more stuff here.  Including energy.  Until then, Bush and Obama both recommend that you spend, spend, spend.

7.    State & Local Government Budget Bomb. In 2010 the states are running budget deficits of over $110 billion.   By law, state budgets must be balanced.  The national government has a monopoly on the dollar.  States don’t have the "luxury" of printing money to pay their bills.  State budget deficits could hit $200 billion next year.  Then add their unfunded pension funds of $500 billion.  Where does this money come from?    Either raise taxes, which is political suicide, or borrow more.  But bond rating agencies have already slashed many states’ credit ratings, raising the interest rates they have to pay.  The alternative, cutting the bloated state  union payrolls and entitlements, appears unthinkable.

8.    Unfunded Corporate Pension Bomb.  In 2007, corporate pension funds had a $55+ billion surplus.  Now they’re short over $400 billion.   Who will make that up?  When the airlines went bankrupt, the Federal Government’s Pension Benefit Guaranty Corporation bailed them out.  Ditto GM.  Who backs up PBGC?  The US Government and more taxpayers’ money. Add another trillion.

9.    Social Security, Medicare & Obama Health Care programs.  Nuclear bombs with hair triggers.  Social Security & Medicare, are already sucking the lifeblood out of the economy.  The latest idea from the Democratic Congress is to cover those medically uninsured by forcing their bills on existing workers and the taxpayer.  There ain’t enough money to go around, folks.  Warns Paul Farrell at MarketWatch : "a new meltdown is coming. The Great Depression II"  You’re right, Paul, the countdown has started and we’re approaching zero-hour.

10.    Government Political Bomb(s).  We have a Dysfunctional 2-Party System which has been infiltrated by progressives on both sides.  There hasn’t been a socialist born who understands real-world economics.  They continue to believe that money grows on trees in their fantasyland utopias. Then add the insatiable Washington Lobbyist Machine of special interests/unions/big banks, the Homeland Insecurity Bomb including military spending (Iraq & Afghanistan at $3 trillion), and the Coming Populist Tax Revolt Bomb

But the godzilla bomb is lurking:  The Plutonium Shadow Banking Derivative Bomb.  

In 2008, the Fed freaked out over a paltry $100 billion in debts that were sloshing around the Wall Street "investment banking" gambling houses.  Lehman Brothers popped first, followed by a dozen more.  Then AIG went poof trying to pay off a little bitty $150 billion in banking derivative "guarantees".  The Treasury quickly poured in money to seal the leaking dam,  slowing the flow to a trickle.

But now global banking derivatives have expanded to over $670 trillion.  Since the entire world’s GDP is only $50 trillion, when this bubble pops, it will consume 13 years of the all money everywhere..

It isn’t going to happen.   We’ll reboot the entire system before that.  There will be winners (people who owe money and own gold) and losers (people who keep their assets in the bank and stock market).  Instant millionaires will be made overnight;  old millionaires will be made penniless.  Which group will you be in?