Storm Clouds On The Horizon For US Debt Problems

It looks like we are going to have problems with US Debt unless "unless Washington finds the political will to restrain their inexorable growth." The qualifier in this article made us laugh. Can anyone really believe that government will find it in their best interests to limit spending?  Of course, the answer is a resounding no. Government spends "other people's money" and they do not think of it anyway else.  

We are going to have a problem and it is going to be massive and will forever change the US and probably the world as we know it.  It is going to a meltdown to match the worst ones in the history of the world. Instead of using the Wiemar Republic as our template for what bad days look like, future generations will reference the US depression.

The constant printing of dollars in Germany in the 1920s has only been surpassed by the Bernacke and Obama regime printing of the 2000's.  You just can't print money like we have been doing for the past five years without there coming a day when we need to pay the piper.  That day is near at hand.

Already, our stock market seems to react to the "potential" decision to reduce or end Quantitative Easing (QE) with fear. Just the mention of a change in QE makes the market drop. 

We are on the edge of a precipice and it won't take much to push us over. Will it be a terrorist event, a financial failure elsewhere or here, a mis-spoken word or something else that will push the dollar and our economy into oblivion.  It is coming, we just don't know when and how.

Our advice is to prepare for the worst and hopefully, you have been prepared for nothing. However, we feel that your plan will not be time wasted.

It's like the story of the ant and the grasshopper. All summer the ant worked diligently putting food away for the winter while the grasshopper ate and relaxed in the sun. When winter came, the grasshopper died but the ant survived. Do you want to be the ant or the grasshopper. We prefer the prior, how about you.

Conservative Tom

New study warns of US long-term debt problems

By ANDREW TAYLOR | Associated Press – 39 minutes ago

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WASHINGTON (AP) — A new government study says that federal health care and retirement programs threaten to overwhelm the federal budget and harm the economy in coming decades unless Washington finds the political will to restrain their inexorable growth. The long-term pressures promise to quickly reverse recent improvements in the deficit.

Tuesday's Congressional Budget Office report says that government spending on health care and Social Security would double relative to the size of the economy in 25 years and that spending on other programs like defense, transportation and education would decline to its smallest level by the same measure since the Great Depression.

The share of federal spending devoted to health care would rise from 4.6 percent of gross domestic product today to 8 percent in 2038; spending on Social Security would rise as well, as the number of people receiving benefits rises to more than 100 million in 25 years, compared with 57 million people taking benefits now.

The rise in costs for the popular benefits programs has been apparent for many years and budget hawks says it's best to tackle their unsustainable growth immediately rather than be forced to make more draconian cuts later. But Washington — whether government is divided or controlled by one party — has been unable to agree on ways to curb the growth of these programs.

Democrats prefer a mix of tax increases and relatively small cuts in Medicare, Social Security and other spending. Republicans have proposed more dramatic long-term cuts to Medicare but are dead set against further taxes, especially after President Barack Obama won rate increases on upper-bracket earners in January.

"The unsustainable nature of the federal government's current tax and spending policies presents lawmakers and the public with difficult choices," CBO said. "To put the federal budget on a sustainable path for the long term, lawmakers would have to make significant changes to tax and spending policies."

Obama inherited an economy in the worst recession since the Depression, which was largely responsible for the spike in the deficit above $1 trillion annually during his first term. The agency estimated in May that the deficit for the soon-to-be-completed 2013 fiscal year would dip to $642 billion.

Most economists measure deficits and debt in relation to the size of the economy. By that measure, the debt would actually decline slightly under the current trajectory over the next five years, dropping from 73 percent of the economy now to 68 percent in 2018. But the ongoing retirement of the Baby Boom generation would contribute to rising debt after that, ultimately bringing the debt to 108 percent of GDP by 2038, with 8 percentage points of that figure caused by the economic drag the debt would have on the economy.

The report is one of a series by the agency and other budget watchdogs warning that spiraling long-term debt threatens to crowd out private investment, raise interest rates and limit Washington's ability to respond to a financial crisis.

The report comes as a divided Congress and Obama need to deal with two important problems: keeping the government funded beyond the Oct. 1 start of the 2014 budget year and permitting the government to borrow more money to pay those bills. Republicans hope to use the must-pass stopgap spending and debt limit legislation to derail "Obamacare" and force further spending curbs.

Rep. Paul Ryan, R-Wis., and chairman of the House Budget Committee, said: "In the weeks ahead, I hope we work together to heed CBO's warning. We must provide relief to the families we serve. We should start by delaying Obamacare and paying down the debt to help grow the economy."