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A Choice For The United States In 2016

Las_Vegas_NY_NY_HotelAs the Obama Administration begins to wind down, Americans begin to look to what lies ahead. The United States is at a crossroads. The political vacation in foreign policy is coming to an end, with the violence and chaos creeping ever closer to American shores. Last week alone there were acts of terrorism in France, Kuwait and Tunisia. Two out of three targets were Western. The factory that was attacked in France was American owned. Domestically while the media chases the latest almost meaningless story lines, the American economy is facing ever stronger headwinds as debt and unfunded liabilities continue to climb unabated.

As spring turns to summer, more analysts are warning investors that the stock market in the United States is over valued and due a major correction. The slowest economic recovery since World War II limps along, with labor participation hovering near the lowest rate since 1978. For the first time since the Great Depression of the 1930’s, more businesses in the United States are closing than opening. This matters because these smaller firms are the real engines of growth in employment and national wealth.

New York City, The Financial Center Of The United States

New York City, The Financial Center Of The United States

Americans have been led by foolish politicians that continue to promise much more than can be delivered. The role of the United States dollar as the international reserve currency has given the country the ability to print money with abandon for decades.

It has funded much of what Americans have taken for granted for years. The country continues to borrow at a reckless pace with debt surpassing GDP (Gross Domestic Product) for the first time in 2013. It was only at 31.70% as recently as 1974.

At the beginning of 2015, national debt in relation to GDP in the United States stood at 101.53%. Despite the consistent lecture given by the Obama Administration how Europeans need to spend more money to stimulate growth, debt in a number of countries have already surpassed prudent levels. The Euro Area average is already at 91.90%. France is at 95%, Italy is staggering along with 132.10% and Spain comes in with 97.70%.

Total (Gross) Government Debt As A Percent Of GDP By IMF

Total (Gross) Government Debt As A Percent Of GDP By IMF

More fiscally responsible nations like Germany have reduced their debt in relation to GDP to 74.70%. The Netherlands are at 68.80%, Switzerland is at 34.20% and the United Kingdom 89.40%.

The British have made the self determination that excessive debt will hamper future growth. The newly re-elected conservative government there is attacking expenditures aggressively. It is important to note that the United Kingdom had the fastest growth in the G-7 nations last year. The same is true in Germany where a primary budget balance has been achieved. That is where expenditures meet tax revenues minus debt payments.

In the United States, the Obama Administration projects budget deficits and therefore debt accumulation as far as the eye can see. There is no attempt to even consider having the nation live within its means. The President boasts about reducing the annual budget deficit by 50% after accumulated shortfalls in excess of $1 trillion USD yearly, for much of his tenure. The United States was borrowing 40% of expenditures, at one time during his first term in office. Although one can argue this huge run-up in debt was necessary in the face of the Great Recession, according to most experts that economic calamity supposedly ended in 2009. The deficit that year hit $1.4 trillion USD.

The Federal Reserve Bank the equivalent of a central bank, has kept interest rates near zero and has injected enormous amounts of liquidity into the economy. This was done through an aggressive policy of quantitative easing (QE), which called for the purchase of trillions of dollars worth of mortgage backed securities and government debt.

Although QE officially ended in 2014, the loose monetary policy is still in force. When interest rates finally rise as they must eventually do, the interest on the debt will absorb an increasingly larger percentage of national wealth. The United States government already is spending $246 billion USD annually on interest. When rates finally rise, the government will be spending more on debt servicing than national defense in the years ahead.

US Federal Debt Held By The Public As A Percentage Of GDP, From 1790 To 2013, Projected To 2038

US Federal Debt Held By The Public As A Percentage Of GDP, From 1790 To 2013, Projected To 2038

The United States national debt is now at 18.286 trillion USD and rising rapidly. That is over $154,000 USD per taxpayer. Yet government leaders act like the spending can continue indefinitely.

In fact, an enormously expensive new entitlement has been added as of 2010. One can debate the merits of the Affordable Care Act known as Obama Care, but one thing is certain. It is not affordable given the present rate of taxation that exists in the United States. Lower taxes in the face of rising expenditures, have guaranteed that the deficits and debt will continue to mount.

The irresponsibility of proposing more spending without a source of revenue has become standard practice among so much of the Washington establishment. As a candidate President Obama had criticized the Bush Administration for reckless spending, which had accumulated a deficit of $163 billion in 2007 and it had ballooned to $485 billion USD in 2008. By the start of a new fiscal year in October of that year another $100 billion was added, due to plunging revenues and more recession related spending. The total of $485 billion USD, was the real deficit for the final months of the Bush Presidency.

Risks Due To Increasing Entitlement Spending, According To GAO's Projections Of Future Trends

Risks Due To Increasing Entitlement Spending, According To GAO’s Projections Of Future Trends

Another $700 billion was added through TARP (Trouble Asset Relief Program). This pushed the deficit up to $1.3 trillion USD. This is the number the public through the Obama Administration continues to have repeated to them. What they do not advertise is that according to federal budget rules, loans are treated as a regular part of expenditures.

By the beginning of 2010, $500 billion of the the total had already been repaid and the rest was tied up in AIG, Fannie Mae and Freddie Mac. So at most the real deficit, was $800 billion USD.

It was President Obama who added an additional $300 billion in stimulus spending for that year. Other increased expenditures and falling revenues, pushed the total 2009 deficit up to $1.4 trillion. Another $500 billion in stimulus spending was slated for future years as part of the 2009 package. This additional spending had nothing to do with the outgoing Bush Administration, which ended its tenure in January of 2009.

The reckless spending continues, with expenditures that were being spent on achieving American foreign policy objectives being replaced with a new round of entitlements. What Americans consistently hear, is that the hyperactive foreign policy of the Bush years were not really paid for. This is true, but neither is the stimulus outlays and massive new spending in entitlements promoted by the Obama Administration. Americans are treated to a constant parade of which political party is more fiscally irresponsible.

It is the Congress, the House in particular which appropriates money and either accedes or denies presidential priorities. Americans have forgotten that the Democrats controlled the Congress and the purse strings in 2007 and 2008, the last two years of the Bush Presidency. This is the same situation that exists today, with the Republicans controlling Congress in the last two years of the Obama Administration.350px-Interest_expense_on_the_U.S._national_debt (2)

Americans have been ill served and deceived by the politicians of the past generation. They were promised that the nation could afford both the proverbial guns and butter. This would translate into huge expenditures for both the military and entitlements.

Other nations who have aspired to great power status have faced a similar dilemma. The United Kingdom chose the social spending through entitlements and that subsequently signaled the end of the British Empire, within the generation following World War II.

The United States in addition to the official debt, is facing unfunded liabilities that now equal in excess of $120 trillion USD. The costs for social security, medicare, government pensions and interest on the debt alone, will soon absorb the entire annual budget. This leads nothing for everything else including defense.

When individuals question whether additional entitlements should be added given the bleak fiscal situation of the country, they are told by the President on down, that it is the right thing to do. To spend the country into bankruptcy according to our present administration, is the moral thing to do. All the extra spending to help various interest groups in American society is absolutely, not being paid for.

President Barack Obama Signing The Patient Protection And Affordable Care Act Into Law At The White House On March 23, 2010.

President Barack Obama Signing The Patient Protection And Affordable Care Act Into Law At The White House On March 23, 2010.

Perhaps that is what the Democratic Party is hoping for. Get spending to a level that will necessitate much higher taxes. That the rising debt and soon taxes as well, will slow down economic expansion escapes them. Since most politicians are former lawyers and many of them have had little experience in the private sector, it is no wonder that the idea of creating conditions for job creation abandons them.

What the American public hears from the politicians and the pundits is how government will create jobs. Only the private sector can generate self sustaining business and therefore jobs. Taking money in the form of taxes to bring forth meager economic opportunity to a select few, brings a poor return for the American taxpayer. It rarely is an efficient use of scarce financial resources.

Barack Obama, 44th President Of The United States (2009-Present)

Barack Obama, 44th President Of The United States (2009-Present)

The Democratic Party is bankrupt of new ideas to generate growth and prosperity. Having achieved their greatest goal in a generation in the form of mandated and government regulated health care, all they can offer now is more entitlement spending on financially unsustainable programs.

If you listen to the candidates of the American Left that is what they are all offering in various degrees. The problem is the next American President, will be unable to kick the can of financial irresponsibility much further down the road. As a nation the United States is rapidly running out of maneuver room, in both fiscal and monetary matters.

The Republican Party as well, needs to level with the American people. The truth is not pleasant to hear, but needs to be said. That much of what has been promised and after endless conditioning expected, is not going to be affordable after all.

The signs of fiscal collapse are everywhere. More municipalities, cities and states throughout the country, face pension and medical costs for retirees that are bankrupting them. These political entities cannot print money, so insolvency often results. It is a foreshadowing of the broken promises that will arrive soon enough, from the federal government as well.

A Kuwait M-84 Tank During Operation Desert Shield In 1990. Kuwait Continues To Maintain Strong Relations With The Coalition Of The Gulf War.

A Kuwait M-84 Tank During Operation Desert Shield In 1990. Kuwait Continues To Maintain Strong Relations With The Coalition Of The Gulf War.

The United States can no longer afford to be the policeman of the world either. It will now need to work in concert with other nations, to achieve many foreign policy objectives. The model for this type of arrangement is the American led invasion of Kuwait in 1991. Occupied by Iraq the previous year, the annexation of the country announced by Saddam Hussein was not accepted by the American President.

George Bush Senior organized a true international coalition, that resulted in the ejection of Iraqis forces from Kuwait. The assistance of equipment, soldiers, and money from numerous nations made the operation successful. It was all achieved in a very short period of time, with a minimum of losses on the American side. 

In the future only when vital national interests are at stake, should the United States be willing to go it alone if necessary.

The choice for the electorate of the United States will be difficult. Many Americans have no idea how close the country is getting to financial collapse. They have been conditioned to believe, that the country can continue to expand entitlement spending indefinitely. Some have never understood the limitations of what is affordable at the national level. They are more concerned with the principle of social justice. Others are totally unconcerned about the coming fiscal and monetary tsunami. They instead want a total remake of the American capitalist system.

US Federal Debt As Percent Of GDP By Presidential Party From 1940 To 2014

US Federal Debt As Percent Of GDP By Presidential Party From 1940 To 2014

If Americans had been forced to pay for the surge in entitlements through higher taxes in recent years, the support for them would be far lower. The present political system in the United States fosters debt, at this juncture in history.

The Democrats will engage in more social spending on their watch, but give into Republican demands to keep taxes lower. The Republicans for their part will often accede to the higher spending, but will not permit them to be paid for. Perhaps they should have allowed the Democrats to have their way. If American taxpayers understood the true cost of existing entitlements, they would be far less willing to go along with proposed new ones.

That nearly half of the American population has little liability in paying federal taxes, is an additional problem. These individuals because of present wealth and tax redistribution polices, do not feel the financial pain of the ever increasing burden of entitlements. There are fewer and fewer Americans being asked to pay for more and more social spending. This cannot continue, without a major impact on the overall American economy and financial system.

Deficit And Debt Increases 2001–2013

Deficit And Debt Increases 2001–2013

The election of 2016, will bring Americans another opportunity to change course and avoid the coming disaster. Will the media and the electorate hold the politicians running for office accountable?

Is someone finally going to ask the main Democrat candidate Hillary Clinton, how the new spending in entitlements she proposes will be paid for? Are Republican candidates going to explain to the American people in an honest manner, how deep the cuts in spending need to be, in order to save the United States from financial disaster? Most likely not, on both counts.

It will be up to the American people to begin the process of holding all politicians accountable, for their foolhardy management of the public expenses and taxes. The media will attempt to distract and blur the important decisions, that now face the American citizenry. This sector of society has its own agenda. The question that remains, is by far the most critical. Are there enough voters left, that understand economic limitations and the importance of slowing the accumulation of debt and runaway spending? Will the Americans soon follow the Greeks over the fiscal cliff? The answer to that question, will soon determine the future of the United States in the 21st century.

2 Comments

  1. Question…how could one begin to have an intelligent discussion about the economy and deficits without even mentioning the useless and unnecessary Iraq war that cost trillions and continues to haunt the US economically today. As you bash Democrats for spending on health care to save lives (and save the country economically in the process) Republicans are still pounding the war drums for a ground war to further escalate violence and cost the US even more. Have you ever even heard of the term defense spending? Of the $1.11 trillion budget in 2015, $598.5 Billion was defense spending (54% of total budget)….and you mention entitlement spending as an issue. wow…

    Rather than mislead people with half truths, why don’t you just ask the to vote Republican.

    1. I do not know where you arrive at your figures but the total budget for 2015 was $3.68 trillion USD that was actually spent with revenues of $3.24 trillion USD. The deficit was $438 billion USD. The defense budget for 2015 was about $600 billion USD As a percentage of GDP it is down to 3.5%. Which is far lower than it once was. Thanks to the budget sequester that took effect it has not increased as much as one might expect, since it was subject to automatic cuts.

      The direct cost of the Iraq war was $1.7 trillion USD with another $490 billion owed in veterans benefits. It could ending up costing more, as much of the war was funded like everything else by borrowing money. As someone who is looking strictly at the economics of the American budget, what makes you think I would be in favor of the expenditures of the Iraqis war?

      The invasion of Iraq was not affordable because it was not paid for. If the American president at the time felt that this was a necessary expenditure it should of been explained as such to the American people and taxes raised in due order.

      However, over time the cost of this foreign misadventure will have a decreasing impact on the American budget, where a brand new entitlement known as Obama Care is not affordable because once again it is not being paid for. The costs of the Unaffordable Care Act are going to cost trillions more than what was promised and will be ongoing if the program actually survives the present death spiral it is now in, Insurance companies will gradually drop out as fewer healthy Americans sign up for the program. One by one the state exchanges are already going bankrupt, Only older and less healthy Americans will be left in the program.

      Saving the country with this program as you state is your opinion and propaganda from the party you support. Many of the people in Obama Care already had insurance before they were forced to cancel their own and if they were too poor they were already on Medicaid. The program will cost jobs for lower income Americans and is it is too costly and inefficient in its present form. It will likely be replaced over the next few years by a different program, with the states more in control rather than the federal government.

      Whether it is Republicans wanting to spend more money or Democrats matters not, because any additional spending for any new programs is not affordable. You seem to approve the excessive spending as long as the party you favor is doing it. While I on the other hand seek to balance the budget where Americans will need to pay for the programs they wish to have. Most Americans would be far less generous with federal spending, if it all had to be paid for with additional taxes.

      I suggest any reader not vote for an individual who panders for votes, by promising programs or expenditures of any kind that cannot be paid for. The sentimentality as you put it of saving lives will not matter, when the country is bankrupt and the government payments for most or all programs are either drastically reduced or eliminated. You cannot keep spending money on programs worthwhile or not, that are not being funded fully by the taxpayers.

      Sooner or later you can no longer kick the can down the road, and expect someone else to pay for it. Democrats and Republicans both have indebted future Americans with insurmountably debt. That is immoral more than anything else.

      P.S. I suggest you reread the article because I clearly critique both parties for reckless spending and state that Republicans are just as guilty of misleading Americans with unfunded programs or policies as Democrats. The problem now is that federal spending and unfunded entitlements are exploding in cost and need to be addressed quickly, to save the country from financial disaster.

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