The federal government will add $5 trillion to the national debt over the next ten year, if the Congressional Budget Office forecast is accurate. At the end of the Clinton administration, federal budget number crunchers were forecasting a $5 trillion surplus over the next ten years.
In three years, the federal government’s projected fiscal situation had a $10 trillion turnaround. The federal government’s budget’s apparently is so out of whack that one would think that putting it on a “diet” would be the best way to rein in the Washington spendthrifts.
Instead, the political establishment (Democrats and Republicans alike) is calling for a tax hike, to rescind some of the Bush tax cuts. According to former congressmen, former cabinet members and current members of Congress (in private), everything should be “on the table”, revenue, discretionary spending and entitlements.
As bad as the political establishment thinks the federal government’s fiscal situation has deteriorated in the near term, the longer term projections about the federal budget reveal is downright scary.
According to Chris Edwards, director of fiscal policy at the Cato Institute, (“The Federal Government in 2040,” Issue #15, June 2003)
“Without reforms, combined spending on Social Security, Medicare, and Medicaid will rise from 8.4 percent of gross domestic product this year to 15.6 percent by 2040, according to Congressional Budget Office projections. …if all other government programs stay at the same size relative to the economy, the budget will grow from 19.9 percent of GDP in 2003 to
27.1 percent by 2040—a 36 percent expansion in the government’s command over the U.S. economy”.
Moreover, Edwards continues.
“Suppose that the three main entitlement programs are not reformed, but that the overall size of the federal government is limited to today’s 20 percent of GDP….”nearly all other federal programs would be squeezed out as Social Security, Medicare, and Medicaid exploded to nearly 80 percent of the budget by 2040. Note that the share of benefits received by the elderly is 76 percent for Social Security, 87 percent for Medicare, and 29 percent for Medicaid. Thus, under this scenario the elderly would elbow aside all other citizens as they seized the bulk of the federal budget“.
Clearly, with an aging population, the political will to “reform” entitlement programs is virtually nonexistent. That means there is only one solution that will discipline the federal government’s Ponzi schemes.
The financial markets will force the federal government to get its fiscal house in order. Whether foreign and/or domestic buyers of the U.S. Treasury ‘s debt “go on strike” or the dollar collapses in foreign exchange markets, no one knows for sure.
However, the handwriting is on the wall.
History is full of examples of nation’s that tried to sustain a welfare-warfare state, a guns and butter society, big government at home and empire abroad.
The political economic lesson of the 20th century is quite simple. The totalitarian welfare warfare states, the Soviet Union, Nazi Germany, Imperial Japan, and Communist China are either destroyed or have abandoned most of their command and control economic policies.
In America, we have created a dog-eat-dog “democracy”.
As congressman Ron Paul observed.
“The American people are also responsible for the growth in government…. We have allowed our constitutional republic to deteriorate into a virtually unchecked direct democracy. Today’s political process is nothing more than a street fight between various groups seeking to vote themselves other people’s money. Individual voters tend to support the candidate that promises them the most federal loot in whatever form, rather than the candidate who will uphold the rule of law. As the brilliant writer and professor Thomas Sowell said, ‘If you have been voting for politicians who promise to give you goodies at someone else’s expense, then you have no right to complain when they take your money and give it to someone else, including themselves’.”
In other words, we have met the enemy…and it is us.
“Published originally at EtherZone.com : republication allowed with this notice and hyperlink intact.”