The Great Depression will look like a small blip compared to the economic collapse the United States is about to suffer, according to several experts. But Congress refuses to listen and do what’s necessary to stave off disaster.
Worse, Congress has been warned year after year since at least 1992, and perhaps before that.
“The federal budget is structurally unbalanced. This will do increasing damage to the economy and is unsustainable in the long term. Regardless of the approach chosen, prompt and meaningful action is essential. The longer it is delayed, the more painful it will be.”
Those were the words of the General Accounting Office (now the Government Accountability Office) 15 years ago. Reporting on the long-term fiscal outlook of the federal government, GAO reported then (PDF) that Medicare, Medicaid and Social Security would grow out of control and that “the path of ‘no action’ is unsustainable.”
It also warned that “a major effort to strengthen the economy must be completed by 2010,” when the Baby Boomers will begin retiring.
We all know what happened in the intervening 15 years: absolutely nothing good. The entitlement programs are still here, larger than ever, and draining ever larger percentages of the national economy.
Last month, GAO reported again to Congress on the nation’s long-term fiscal outlook. It’s only gotten worse.
“GAO’s current long-term simulations continue to show ever-larger deficits resulting in a federal debt burden that ultimately spirals out of control,” GAO reported (PDF). Even under the best-case scenario GAO studied, “the risks to the Nation’s future financial condition are too high to be acceptable.”
And again, the problem is government entitlement programs — and Social Security, bad as it is, isn’t even the biggest one.
In the succeeding 2 decades America’s population will age dramatically, and relatively fewer workers will be asked to support ever larger costs for retirees. . . .
Although Social Security is a major part of the fiscal challenge, it is far from our biggest challenge. Spending on the major federal health programs (i.e., Medicare and Medicaid) represents a much larger and faster growing problem. In fact, the federal government’s obligations for Medicare Part D alone exceed the unfunded obligations for Social Security. Over the past several decades, health care spending on average has grown much faster than the economy, absorbing increasing shares of the Nation’s resources, and this rapid growth is projected to continue. For this reason and others, rising health care costs pose a fiscal challenge not just to the federal budget but to American business and our society as a whole. — Government Accountability Office
Federal Reserve chairman Ben Bernanke last week also warned Congress, but of course, most of them refused to listen or even acknowledge that the problem exists.
Federal Reserve Chairman Ben Bernanke could not have sounded the alarm any clearer if he had carried a bullhorn and a gong. “This expansion of debt would spark a fiscal crisis. . . . The U.S. economy could be seriously weakened. . . . This is sort of like a snowball rolling down the hill. . . . This can really get out of control.”
Other lawmakers struggled to wrap their arms around the crisis Bernanke was describing. “We’re just, kind of, whistling past the graveyard?” asked Rep. Marion Berry (D-Ark).
“Yes, sir,” said the chairman.
“And hoping that the tooth fairy comes and bails us out of this deal?”
“I don’t know about the metaphors there, Mr. Congressman,” Bernanke replied.
Rep. Jeb Hensarling (R-Tex.) had a different metaphor to run by the chairman. He asked if “we are debating how to mop up six inches of water in the stateroom of the captain of the Titanic when we should be focused upon the gaping hole in the hull of the ship.”
“The heart of the problem are the entitlement programs,” Bernanke affirmed. — Washington Post
“Federal deficits will grow to unsustainable levels in as little as two decades,” says David M. Walker, the comptroller general of the United States, “At that point, without significant policy changes, federal deficits could reach 10% or more of our economy.”
As head of the GAO, it’s Walker’s responsibility to sound the alarm. Not at all satisfied with Congress refusing to listen, he’s taken his message directly to the people, appearing on CBS News’ 60 Minutes television program on Sunday, and touring the U.S. “We are the world’s largest debtor nation, and time is working against us,” Walker said in an article for The Futurist magazine.
Indeed, the American welfare state is growing out of control, with tens of millions of Americans receiving some form of government handout.
The number of families receiving cash benefits from welfare has plummeted since the government imposed time limits on the payments a decade ago. But other programs for the poor, including Medicaid, food stamps and disability benefits, are bursting with new enrollees.
The result, according to an Associated Press analysis: Nearly one in six people rely on some form of public assistance, a larger share than at any time since the government started measuring two decades ago. — Associated Press
“This story only looks at the welfare state for the poor,” writes Cato Institute vice president David Boaz. “Far more than one in six Americans are dependent on such government programs as Social Security, Medicare, unemployment compensation, and so on. . . . And how long can a nation remain free if half its citizens are dependent on government hand-outs?”
Rep. Ron Paul (R-Texas), who is running for President in 2008, also sounded the alarm.
When it comes to Social Security and Medicare, the federal government simply won’t be able to keep its promises in the future. That is the reality every American should get used to, despite the grand promises of Washington reformers. Our entitlement system can’t be reformed — it’s too late. . . .
The politicians who get reelected by passing such incredibly shortsighted legislation will never have to answer to future generations saddled with huge federal deficits. Those generations are the real victims, as they cannot object to the debts being incurred today in their names.
The official national debt figure, now approaching $9 trillion, reflects only what the federal government owes in current debts on money already borrowed. It does not reflect what the federal government has promised to pay millions of Americans in entitlement benefits down the road. Those future obligations put our real debt figure at roughly fifty trillion dollars — a staggering sum that is about as large as the total household net worth of the entire United States. Your share of this fifty trillion amounts to about $175,000.
Don’t believe for a second that we can grow our way out of the problem through a prosperous economy that yields higher future tax revenues. If present trends continue, by 2040 the entire federal budget will be consumed by Social Security and Medicare alone. The only options for balancing the budget would be cutting total federal spending by about 60%, or doubling federal taxes. To close the long-term entitlement gap, the U.S. economy would have to grow by double digits every year for the next 75 years.
The answer to these critical financial realities is simple, but not easy: We must rethink the very role of government in our society. Anything less, any tinkering or “reform,” won’t cut it. — Rep. Ron Paul
In summary, the welfare state that the socialists built here from the 1930s (after they destroyed the money supply and created an artificial depression) is going to do the same thing it did when they built it in the Soviet Union. And if their example is any guide, it won’t take until 2040 for the nation’s economy to collapse utterly. It will be sudden and unexpected. It will be horrific. Millions of Americans will die, never knowing what happened. But if you’ve read this far, you will know why: In a word, socialism.
Socialism sounds good, because it plays on the emotions, not because it’s good fiscal policy. It’s terrible fiscal policy. For that matter, it’s also terribly damaging — psychologically and financially — to those who it ostensibly would help.
Maybe this time around, we will actually remember the lesson. Maybe this time around, we’ll remember what real money is, and reject the worthless paper our overlords have given us in its place. Maybe this time around, when millions of Americans are starving in tents, we will look not to government for a “solution” which makes economic slaves of us all, but where we should have looked in the first place: our neighbors, our communities and within ourselves.