U.S. debt situation is calamitous, worse than anybody said

Dr. Mark W. Hendrickson's picture

Brace yourself. This isn’t going to be pleasant. If you’re in a bad mood or get easily upset, you may wish to pass on reading this article.

The country is in even worse shape economically than we thought. We awoke on Feb. 14 to find that this year’s federal budget deficit is going to be larger than previously projected — a record $1.65 trillion.

Recently, the official accumulated debt of the federal government passed the $14 trillion threshold.

A trillion is a gigantic number. If you stacked $100 bills flat on top of each other, then turned that stack on its side, a trillion dollars would stretch from where I live in western Pennsylvania to somewhere past St. Louis.

That’s just ONE trillion. Multiply that by 14, and it would stretch from here to Honolulu and back with plenty to spare.

The really bad news is that Uncle Sam’s debt is significantly greater than $14 trillion, and I am not referring to the tens of trillions of dollars of unfunded liabilities representing undeliverable government promises. According to data released by the U.S. Treasury on Jan. 21, the public debt is $20.7 trillion, an increase of $3.3 trillion in just the last year.

The larger sum — actual existing debt of $20.7 trillion — includes such off-budget items as bailouts, Fannie Mae and Freddie Mac, student loans, and who knows what else?

I have to say “who knows what else,” because the leviathan federal government long ago became too large to keep track of.

For example, 25 years ago the Grace Commission, instituted by Ronald Reagan in the hope of identifying ways to streamline the federal government, was unable to tabulate how many people worked for the federal government, although they did manage to identify 963 federal programs that redistributed wealth.

Not only is our current national indebtedness more than 40 percent greater than the already horrendous commonly cited figure, the Social Security program is in worse shape than expected, too.

As recently as a month or two ago, it was widely accepted that payouts from Social Security would start to exceed revenues in 2016. In a stunning development, the nonpartisan Congressional Budget Office released a report on Jan. 26 which projected that revenue shortfalls will begin this year and continue uninterrupted until all unfunded IOUs are exhausted by 2037 (if not much sooner).

The CBO projects what would have been a $45 billion shortfall this year, but thanks to the terrible deal that President Obama and congressional Republicans forged in December — the one that included a 2-percent reduction in Social Security withholding from workers’ paychecks — this year’s Social Security red ink is expected to hit $130 billion.

At the state level, finances are deteriorating at a sickening speed. Governors are starting to ask the Obama administration for permission to drop people from Medicaid (280,000 people in Arizona alone).

Moody’s, the debt-rating agency that seems to wait until after a collapse has happened to lower its rating of an entity’s finances, is making noises about downgrading the credit rating of several states.

At the municipal level, many bonds continue to tank as municipalities careen toward bankruptcy. Of the three largest bond insurers, two are already bankrupt while the survival of the third is in doubt.

Meanwhile, Obamacare is ripping us apart. The administration itself has already granted over 200 waivers to well-connected businesses and labor unions from having to comply with its unaffordable costs (meaning that wealth is being redistributed from those who don’t receive the exemptions to those that do).

Two federal judges have upheld Obamacare while two others have ruled it unconstitutional. The result is that some state governors and attorneys general are voiding it within their jurisdictions while others are not.

Obama is proceeding with costly implementation despite the bill’s uncertain status. Besides the confusion and uncertainty that this is sowing, valuable time will be consumed in waging this titanic constitutional struggle — time that could and should be spent addressing the ballooning spending/debt crisis.

Given the magnitude of governmental fiscal woes, the struggle in Washington between Democrats who talk about (but don’t propose) a possible spending freeze in one small corner of the federal budget, and Republicans who claim to want to cut $100 billion of annual spending, is a cruel joke. Talk about fiddling while Rome burns!

The financial condition of governments at all levels is worse than it ever has been. Neither political party seems ready to address the crisis in any meaningful way. As a result, our financial predicament is even worse than most of us had thought.

[Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values (www.VisionAndValues.org) at Grove City (Penn.) College.]

PTC Observer
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Debt? What debt?

Some of those on this board will never believe that our national debt crisis is really that....a crisis.

Check this out:

http://mises.org/markets.asp#federal

Once there scroll down to the charts entitled:

"Federal Surplus or Deficit" and "Gross Federal Debt"

Unless you are a true lefist you cannot deny that we are in serious trouble with an out of control government that has lost all touch with reality. We will all pay a dear price for this folly.

Davids mom
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What is unsettling

is 'who' we are in debt to!!! Not exactly our supporters or friends. One administration didn't get us into this mess - and unless we have a Congress and President that can put politics aside, the next two administrations won't be able to get us out of this mess. In the meantime, unless we prepare our children for the future challenge by providing them with a superior education, those that we are indebted to will surpass us as a world leader. We must have leadership that looks beyond the 'next election'.

carbonunit52
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I am a believer PTCO

and I have been since that nitwit Ronald Reagan started construction on this house of cards. What really twisted the fuzz on my ears was trying to understand the reasoning behind stuff like credit default swaps and short selling.

phil sukalewski
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I read this article and this

I read this article and this weeks editorial (mentioning the current 9% unemployment rate) & here's a simple summation"

President Obama's budget calls for deficit over the next 5 years or $1 trillion or more on average.

The 9% unemployment rate says that 13.8 million Americans are unemployed.

$1 trillion = 10 million jobs at $100K each.

It's too bad that we are running these Federal deficits and thus taking $1 trillion out of the economy each year. Seems it would do better to leave it in the private sector and let 10 million Americans find self-worth (I mean work).

roundabout
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Anoter Grove City College essay

I don't remember these dudes writing such letters to the Bush administration! Their funds would have dried up had they done so!

lion
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Spending and investing

The IDIOT Republican Governor of Florida has joined the IDIOT Republican Governors of Ohio and Wisconsin in rejecting huge amounts of Federal money for high speed rail.

Is there any chance that the Georgia Republicans who have not yet proven themselves to be total Idiots will step up their interest in high spped rail and get some of this Federal money?

This woiuld be a huge investment in the future for Georgia and result in many new jobs.

NUK_1
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Spending money you don't have right now

Scott in FL rejected the idea because he's concerned about where Florida is going to get 3 billion or so when they have to subsidize rail.

From the Christian Science Monitor:
"These concerns are well-founded, says Ken Button, director of the Center for Transportation Policy at George Mason University in Fairfax, Va. “One major concern expressed by the governors is that the ridership will be lower than forecast and [the projects would] turn out to cost much higher," he says. “Experience suggests they will be right: forecasts of all forms of public-transport use throughout the world have tended to be optimistic, and cost estimates have been way below the actual cost.”

I'm sure any governor-Repub/Dem or Commie, would gladly accept rail and the Feds' $$$ if the Fed also covered all the losses the state incurs. Until then, it's dangerously irresponsible for a state to obligate its citizens to billions in costs when almost all states are cutting and cutting due to the economic realities.

Observerofu
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Nuk-Absolutely correct

Many here, like Lion, fail to realize that the subsidized Governmental project only covers the original item stated.
Maintenance, salaries, fees, and related expenditures are always the States responsibility. Nothing comes for free.
If a State sees their share of the financial pie as a burden then they are right to say no to the funding.

Amtrak is a great example of a Government subsidized program that cost taxpayers excessive amount of money to maintain.

This isn't the field of Dreams. Just because they build doesn't equate to people coming to ride it.

AtHomeGym
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Hi-speed Rail

is getting lots of print because it's a hi-pri of POTUS. Trans Sec LaHood says negotiations had been done that would force those competing for the project to agree to pay for over-runs and operating expenses. Force? I guess that means if you don't agree with the stipulations, you have no chance for the contract. So what business owners in their right mind would accept such a mandate? And how many other Governors have turned down the hi-speed rail offers? I blv 3 others and why do you think they did? More than liikely the very same reason Gov Scott did. And who blvs that a hi-speed rail connection between Atlanta and Charlotte will be profitable? You do? Tell me why!

roundabout
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GYM: transportation

So you want 600,000,000 Americans in 30 years to drive cars or ride airplanes---nothing else?
Dumb!

As to the Charlotte RR line, the Interstates weren't built in a year you know?

Are airlines profitable for the last 50 years? Are car companies?

That is not the problem----transportation is.

Even the Romans built roads or they wouldn't have even lasted 20 years, much less hundreds of years.

Only smart Presidents think like that!

lion
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Race back to the 19th century

Conservative Republicans always see the future as something to be feared rather as an opportunity.

Reject high speed rail. Reject healthcare. Cut Medicaid. Cut funds for education. Attack undocumented immigrants. Attack American women's right to control her reproductive health. Crush the unions. What a dismal agenda!!

And in Georgia the Republicans finally cave to the Christian Taliban and refuse to let citizens vote on the right to buy alcohol on Sunday.

With this Republican agenda, we need to drink every day of the week.

But there is a glimmer of hope.

In Wisconsin, public employees and other citizens are rising up to oppose the Republican attack on unions and the middle class. I do not know who will be succsessful in this battle. But it is time to stand up for the middle class against those who want to destroy it.

PTC Observer
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Lion is actually correct

We are racing back to the standard of living of the 19th century. It is because people like lion want to keep spending money that we don't have. Refer to my earlier e-mail on this thread.

The employees of the state of Wisconsin are up in arms, just like the government employees of France, Spain, and Greece. All socialist states where the concept of the public dole is rampant. We can expect more of this activity to occur in our future as states face bankruptcy because of federal mandates and out of control spending. It is a battle of classes, on this lion is correct, but it is a battle between those that pay into the government vs. those that live off of the government.

If the middle class is built on government service employees then the entire economy is going to crumble. If you don't see this then you are simply blind to reality.....or a leftist.

Observerofu
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The Anarchistic Lion speaks

yes let's rise up and have Egypt styled riots here.

That is the call of most liberals. Chaos for change. The middle class voted in November lion they chucked you guys out. Why is it you can mouth the words but not understand the meaning.

WE ARE BROKE. Come on say it with me. WE ARE BROKE. As in busted, crapped out etc..

We can no longer afford your liberal entitlement mentality any longer. So go ahead rise up take to the streets, but remember one thing. You want Chaos just be careful what you wish for you just may get it.

lion
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O: We are not broke

We are not broke.

We have just not taxed you enough.

Standing up for the middle class is not chaos. It is simply fairness and justice.

Observerofu
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The middle class already stood up

and kicked the progressives out of office.

Lion the sad truth is you probably do believe you just need to tax everyone more. The morally bankrupt ideas of the progressive caucus is strangling the US and the Citizens are Tax Enough Already and they were heard from in November.

lion
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O: progressives and the middle class

Most progressives are middle class.

Middle class conservatives did outvote middle class progressives last November.

But I thought the main issues in the election were jobs and the economy. Attacking and overturning middle class job protections gained during the last 100 years were not issues people thought they were voting on.

Raising taxes at times may be needed to address and solve some of our problems.

I do not understand those who oppose any tax increase as if "no new taxes' was some covenant with God.

Observerofu
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Lion I know you don't understand

that much is obvious.

The Government takes in over $2.5 TRILLION dollars each and every YEAR in revenue.

This year this administration budget is $3.7 TRILLION leaving over a Trillion in deficit spending. Now that does not even take into account the deficit spending of Medicaid, Medicare and now Social Security which now has our unfunded liabilities at $112.6 TRILLION dollars

Let me repeat that we CURRENTLY have $112.6 TRILLION dollars in UNFUNDED PROMISED liabilities.

That is the same thing as your personal debt. You owe the bank say for a Mortgage, Car and cards. The total amount you owe is the unfunded liability part. You don't have the funds to pay them off and you are not insolvent yet, but should your revenues/salary decline drastically what do you think would happen if you started missing payments?

Our economy is dragging by, barely on it's last legs. Taxing businesses and those that supply liquidity to those businesses removes funds that those businesses use to create jobs.

Lion the Government is NOT the creator of jobs. Businesses are.

The Government cannot give wealth to anyone without first taking it from someone else and that someone else are those that supply for the most part the majority of jobs and the stimulus to the economy.

NUK_1
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Wasting your time and energy, Obsever

You're arguing with "lion" who has said over and over that Social Security isn't a Ponzi scheme and that the present contributors aren't in fact paying off the past contributors. Never mind the fact that when SS was established that people became immediately eligible despite never paying into it, plenty of people get SS benefits that never paid into it, or the reality that it isn't anything economically self-sustaining and anyone with a brain should already know that. It's a huge DUH and anyone that doesn't understand that is way past the point of convincing otherwise because they are hopelessly STUPID. It's either an entitlement program hyrbid or it can be purely social welfare. It's not self-sustaining and never was since the day it was enacted. It's disturbing that people are so math illiterate that they think otherwise. Welcome to Bernie Madoff's world of total suckers and sheep to take advantage of, only he gets prison time for it while the gov gets to skate by.

The laughably ignorant argument that SS has funded itself and will continue to do so in the future is as goofy as calling illegals "undocumented immigrants." Puke.

I also see you are now arguing with roundabout/courthouserules/dollarsanddays/bonkers.......you need a new hobby :)

I guess my point is to preserve your sanity and stop arguing with morons. You can always go back and forth with CPB in the meantime. He may be bent in the wrong direction, but he's got a lot more sense than some of the fools you are responding to.
------
Reverend Martin Luther King said: 'Nothing in all the world is more dangerous
than sincere ignorance and conscientious stupidity.'

Chris P. Bacon
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The Pyramid Scheme Myth

Howdy Nuk, I was perusing the usual Godless Librul websites today when I came upon this interesting rebuttal to the "Social Security Is A Ponzi Scheme" mantra that is so casually bandied about around here: LINK

It's a short read, only 3 paragraphs, and I'd quote it but I'm hesitant to run afoul of board copyright restrictions (wouldn't want to get banned, you know, that would absolutely wreck my week).

I'm interested in your thoughts on this article.

NUK_1
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CPB: Social Security

I don't see anywhere in the 3 paragraphs where he refutes the ponzi scheme aspect of new workers paying off the old in the SS system. I see where he really thinks SS is a noble idea and feels it has less risk than the ups and downs of markets, but that can also be said of other social welfare programs that are purely called "entitlements" and not sold to the public as some kind of self-supporting program.

All that blah blah blah said, he DOES refute that it's a pyramid scheme which is very true; SS is NOT a pyramid, at least by what I consider a pyramid scheme to be. It is a ponzi however. There's a difference.

I think the biggest opposition to even doing a small amount of privatization to SS is that politicians are terrified that then the public will realize they have been getting lied to all these years because any money that doesn't go into SS has a direct effect on being able to pay off the workers that came before now. Instead, they try to make it seem like people who have a problem with SS simply don't want people to have any kind of retirement and be totally at the mercy of financial markets. That's not the case.

AtHomeGym
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Nuk & Social Security

Certainly no expert on the subject but what I do know is that, although I paid into the system for 21+ years, I never considered it to be an integral part of my retirement. Good thing too, because with something called the "Govt Offset", my monthly return on my investment is surely not enough to survive if it was a sole source of income. However, the fact is, if it went away, my family's lifestyle would not change one bit and it would only mean that my monthly Cash Reserve (savings) would take a hit.

NUK_1
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AHG: All true

If SS is there when I hit whatever retirement age is set at that time and pass whatever "means test" that may be in place.....great. If not, it's not something I was ever truly counting on seeing no matter how much I paid into the system.

Mike King
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Chrispy

Having enjoyed your daily darts, I'm inclined to ask that of the article you reference, would it be prudent for all that receive said benefits be fully vested? Or, could that model be only relevant for a truly 'prudent' society (A society without all the left/right posturing).

Observerofu
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Nuk I know it's actually just an exercise for Bacon

he needs a tutorial on cognitive thinking and debate. I hope this will help 8-)

roundabout
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OOU: Unfunded?

Now why would you list ONE year's U. S. income but then list numerous years of annual payouts?

Why didn't you list your projected numbers for the U.S. total income for however many years is in your $112.6 Trillion?
Don't know, do you?

Not only is the government "broke" but every citizen and every corporation is broke if their assets are compared to their debts. Most owe more on their house alone than they have in cash.

As long as we can pay the interest on loans we are not broke.

Are you suggesting that we pay off our debt before we spend any more!

Hey, you came in with nothing, you will go out with nothing!

Observerofu
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Your ignorance is only surpassed by ok nothing

Roundabout go take a economics class will ya. You really should know a little about a subject before you spout off about it.

roundabout wrote:

As long as we can pay the interest on loans we are not broke.

That is simply one of the most RIDICULOUS statements I have ever heard.

OK another lesson in Cognitive Thinking. Listen up Bacon.

This is going to be short but Oh so sweet.

I will use an analogy for you to try to help you along.

Your neighbor is considered by you to be the richest in the neighborhood. They have the biggest house. The best cars, take long and expensive vacations etc...

Now your perception of them is based of your observation of their habits.

Now here is the critical part. Do you know their financial status?

Let's say they are neck deep in debt. They are missing payments, maxing out credit cards just to try to stay above water.

Now Roundabout are they the "Richest" in the Neighborhood or are they broke?

roundabout
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OOU

I said that most of us owe more than we are worth! Was that too complicated for you? You said the same thing.

Yet we go on as long as we can pay the interest.

The USA pays about 6% of the budget to pay the interest on the loans we have.

Most citizens pay about 10-12% of their budget on home, auto, credit card, etc., loans now.

The most I mention amounts to about 85% of families.

Do you have any idea how much interest DELTA pays, Percentage wise, out of their profits?

All that interest paid by the 85% keeps the other 15% in good condition collecting on their investments.

Economics theories are as numerous as butts. Survival depends upon action taken at the right time!
One way of dong it is like DELTA--declare bankruptcy, don't pay your debts, cheat stockholders and employees out of their investment in DELTA, get another long term loan and find more suckers!

There is one economic theory not in the stupid textbooks.

It is repeated nearly every day somewhere.

Even by over a hundred so-called banks in Georgia alone! Also, assets, like homes, can be carried on a loaner's books far beyond the current worth, another economic theory.
Actually if one can't sell a home in a year it is worthless as an asset, isn't it?

Broke means---find some credit or a sucker!

Observerofu
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Economics 101

Metric, % USA - 2010 Projection
Federal Spending As Percentage of GDP 25.4%
Federal Deficit As Percentage of Spending 41.8%
Federal Deficit As Percentage of GDP 10.6%
Total Government Debt As Percentage of GDP 94.3%

http://www.briefing.com/GeneralContent/Investor/Active/ArticlePopup/Arti...

Not 6% Roundabout.