Is America's financial collapse inevitable?

• majorspark

  

  Pat Buchanan makes quite a case. I find it hard to disagree with him. No politician will have the balls to do what needs to be done to stop our eventual default. I guess we just wait until the laws of economics force politician to grow a pair. Too bad many Americans will have to bear a greater burden because of their lack of leadership.
  
  This problem transends political ideology, since no one will be able to move their ideas forward without a stable economic environment.
  
  Does anyone think we will be able to get enough people in power to right the ship? Or maybe some think it can't happen?
  
  Here is Pat's article

  Is America's financial collapse inevitable?
  
  --------------------------------------------------------------------------------
  Posted: January 14, 2010
  8:10 pm Eastern
  
  © 2010
  
  We were blindsided. We never saw it coming.
  
  So said Goldman Sachs CEO Lloyd Blankfein of the financial crisis of 2008. He likened its probability to four hurricanes hitting the East Coast in a single season.
  
  Blankfein was reminded by the chairman of the Financial Crisis Inquiry Committee, Phil Angelides, that hurricanes are "acts of God." Financial crises are manmade. Yet Blankfein was backed up by Jamie Dimon of JPMorgan, who said, "Somehow, we just missed ... that home prices don't go up forever."
  
  The Wall Street titans thus conceded they did not foresee the housing bubble ever bursting and they did not consider the possibility of a collapse in value of the sub-prime mortgage securities piled up on their books.
  
  Backing up Blankfein's plea of ignorance and incomprehension is this: The crisis killed Lehman Brothers and would have killed every one of them had not the Treasury and Fed, neither of which saw it coming, either, intervened with hundreds of billions in bailout cash.
  
  Yet there were those who warned a housing bubble was being created like the dot-com bubble; others who predicted the Empire of Debt was coming down – as, today, there are those warning that the United States, with consecutive deficits running 10 percent of gross domestic product, is risking an eventual default on its national debt.
  
  The warnings come from the Committee on the Fiscal Future of the United States, chaired by Rudolph Penner, former head of the Congressional Budget Office, and David Walker, former head of the Government Accountability Office and author of "Comeback America: Turning the Country Around and Restoring Fiscal Responsibility."
  
  Who's getting richer under the Obama regime? Find out in Tim Carney's new book, "Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses"
  
  With that share of the U.S. national debt held by individuals, corporations, pension funds and foreign governments having risen in 2009 from 41 percent to 53 percent of GDP, Penner and Walker believe it imperative to get the deficit under control. Unfortunately, it is not possible to see how, politically, this can be done.
  
  Consider. The five largest elements in the budget are Social Security, Medicare, Medicaid, defense and interest on the debt.
  
  With interest rates near record lows, and certain to rise, and back-to-back $1.4 trillion deficits, this budget item has to grow and has to be paid if the U.S. government is to continue to borrow.
  
  Second, with seniors on fire against Medicare cuts in health-care reform, it would be fatal for the Obama Democrats to curtail Social Security or Medicare benefits any further this year. Next year, they will not only lack the congressional strength but any desire to do so, after their anticipated shellacking this fall.
  
  The same holds true for Medicaid. The Party of Government is not going to cut health benefits for its most loyal supporters. Indeed, federal costs may rise as state governments, constitutionally required to balance their budgets, cut social benefits and beg the feds to pick up the slack.
  
  This leaves defense. But the president is deepening the U.S. involvement in Afghanistan to 100,000 troops, and the military needs to replace weaponry and machines depreciated in a decade of war.
  
  Where, then, are the spending cuts to come from?
  
  Can the administration cut Homeland Security, the FBI or CIA after the near disaster in Detroit? Will Obama cut the spending for education he promised to increase? Will he cut funding for food stamps, unemployment insurance or the Earned Income Tax Credit in a recession? For the near term, the entitlements are untouchables.
  
  Is this Democratic Congress, which increased the budgets of all the departments by an average of 10 percent, going to take a knife to federal agencies or federal salaries, when federal bureaucrats and beneficiaries of federal programs are the most reliable voting blocs in their coalition?
  
  What about tax hikes?
  
  Obama has promised to let the Bush tax cuts lapse for those earning $250,000 but has pledged not to raise taxes on the middle class. Any broad-based tax would be politically suicidal for him and his increasingly unpopular party.
  
  But if taxes are off the table, Afghan war costs are inexorably rising and cuts in Social Security, Medicare, Medicaid and entitlement programs are politically impossible, as pressure builds for a second stimulus, how does one reduce a deficit of $1.4 trillion?
  
  How does one stop the exploding national debt from surging above 100 percent of GDP?
  
  America is the oldest and greatest constitutional republic, the model for all the others. But if our elected politicians are incapable of imposing the sacrifices needed to pull the nation back from the brink of a devaluation or default, is democratic capitalism truly, as Francis Fukuyama told us just two decades ago, the future of mankind?
  
  What the looming fiscal crisis of this country portends is nothing less than a test of whether this democratic republic is sustainable

  .
• majorspark

  

  I hade a couple of browsers open. Wrong forum. Mods you want to move this. Thanks.
• Cleveland Buck

  

  Yes it is, but you should probably move this to the Politics forum. You won't get any useful feedback out here.
• derek bomar

  

  we're fucked homie...learn chinese
• Cleveland Buck

  

  We won't need to speak Chinese when we are working their rice fields. All you need to know is to work harder when you get whipped on the back.
• tk421

  

  Yes, within my lifetime. China will stop lending eventually.
• FatHobbit

  

  derek bomar wrote:learn chinese

  That's what almost every fortune cookie I've ever opened told me. I think it's a sign.
• tk421

  

  United States of China. Has a nice ring to it, doesn't it?
• believer

  

  I have a hunch the Chinese fully understand that their economic health depends on a healthy American consumer economy.
  
  The minute they call in the loan not just the American, but the world-wide financial default process begins. If you think last year's mortgage meltdown was bad, we ain't seen nothing yet.
  
  The negative effects will travel all the way around the globe and end up biting the Chinese on the ass.
  
  Since the Chinese economy is based on their own under-valued currency, cheap labor, and government subsidies the Chinese have more than just the American economy to be concerned about.
• ptown_trojans_1

  

  No.
  
  America will decline in relative power due to globalization, but it will not collapse. There was a fear of Japan rising and surpassing the U.S. in the 1990s and that did not happen. China will crest eventually. America will not collapse as new leaders and policymakers always rebound and steer the country in a new direction.
  
  I look at the history of the U.S. and think, this era is nothing. We have survived rougher times and will survive rougher times. Thinking, "Oh, the end is near!" does not help.
• tk421

  

  ptown_trojans_1 wrote: No.
  
  America will decline in relative power due to globalization, but it will not collapse. There was a fear of Japan rising and surpassing the U.S. in the 1990s and that did not happen. China will crest eventually. America will not collapse as new leaders and policymakers always rebound and steer the country in a new direction.
  
  I look at the history of the U.S. and think, this era is nothing. We have survived rougher times and will survive rougher times. Thinking, "Oh, the end is near!" does not help.

  How exactly is any politician going to steer us in a new direction? No one is going to cut the budget, the spending isn't going to end. We can't borrow money forever, even if China needs a stable America.
• IggyPride00

  

  The perfect illustration of why we are screwed is seen in this years defense budget.
  
  This new healthcare bill the Senate passed in December (which is essentially going to end up being the final bill if it passes) had a cost of $849 Billion over 10 years.
  
  Counting the extra $33 Billion the President just requested for the Afghanistan War, the 2010 defense budget (1 year) when you add up the total of defense spending, veterans affairs, homeland security, interest on debt incurred in past wars and other miscellaneous stuff, we are looking at roughly $900 Billion to $1 Trillion Dollars.
  
  Now we have heard Armageddon is coming financially to this country if the health care bill is passed due to its cost, yet we have heard not a peep from any single politician about the fact the Defense budget for 1 year is going to surpass the cost of the 10 year healthcare bill estimated cost.
  
  If we did defense bills as 10 year budget items like the health care reform bill it would look like a 10 year $10-11 Trillion dollar (probably much higher) bill. It is just not sustainable, and when you look at it cumulatively like that instead of on its own you get a grasp for just how out of hand it is.
  
  I don't think the healthcare bill is a good one by any means, but I am trying to illustrate how we have our collective head in the clouds that no one bats an eye at an almost trillion dollar defense budget for the year, yet for a 10 year bill that is cheaper (projected to be at least) that at least theoretically provides some healthcare for most people we clearly are not looking at the big picture.
  
  In just individual income taxes alone last year, (not corporate, SS or Medicare which have assigned purposes) the government collected roughly $900 or so billion.
  
  While the numbers are rough estimates, we pretty much spent every dollar of income tax we paid on War related things. Not a dime for anything else left.
  
  The defense budget needs to be attacked wtih a machete. The entitlements need it to, but as of now at least they are paying their way, and with a tweak to the with-holding %'s they can be fixed for a while longer.
  
  America is headed for a financial collapse unless we decide that either we are going to drastically increase income tax levels, or we come to peace with the fact we can't afford to play world police and be all things to all people.
  
  Yet I am sure we all know how likely that is knowing that the 24/7 news cycle and the Dick Cheney's of the world will be plastered all over the TV screaming about how weak we are if the defense budget increases are even slightly slowed down, much less dreaming of lopping the 35% or so that needs to come off it if we really want to start addressing the debt.
  
  We are screwed.
• believer

  

  ptown_trojans_1 wrote:China will crest eventually. America will not collapse as new leaders and policymakers always rebound and steer the country in a new direction.
  
  I look at the history of the U.S. and think, this era is nothing. We have survived rougher times and will survive rougher times. Thinking, "Oh, the end is near!" does not help.

  I appreciate your optimism but based on what I've been seeing on both sides of the political aisle the past 20 years, I'm not feeling warm and fuzzy yet.
• Footwedge

  IggyPride00 wrote: The perfect illustration of why we are screwed is seen in this years defense budget.
  
  This new healthcare bill the Senate passed in December (which is essentially going to end up being the final bill if it passes) had a cost of $849 Billion over 10 years.
  
  Counting the extra $33 Billion the President just requested for the Afghanistan War, the 2010 defense budget (1 year) when you add up the total of defense spending, veterans affairs, homeland security, interest on debt incurred in past wars and other miscellaneous stuff, we are looking at roughly $900 Billion to $1 Trillion Dollars.
  
  Now we have heard Armageddon is coming financially to this country if the health care bill is passed due to its cost, yet we have heard not a peep from any single politician about the fact the Defense budget for 1 year is going to surpass the cost of the 10 year healthcare bill estimated cost.
  
  If we did defense bills as 10 year budget items like the health care reform bill it would look like a 10 year $10-11 Trillion dollar (probably much higher) bill. It is just not sustainable, and when you look at it cumulatively like that instead of on its own you get a grasp for just how out of hand it is.
  
  I don't think the healthcare bill is a good one by any means, but I am trying to illustrate how we have our collective head in the clouds that no one bats an eye at an almost trillion dollar defense budget for the year, yet for a 10 year bill that is cheaper (projected to be at least) that at least theoretically provides some healthcare for most people we clearly are not looking at the big picture.
  
  In just individual income taxes alone last year, (not corporate, SS or Medicare which have assigned purposes) the government collected roughly $900 or so billion.
  
  While the numbers are rough estimates, we pretty much spent every dollar of income tax we paid on War related things. Not a dime for anything else left.
  
  The defense budget needs to be attacked wtih a machete. The entitlements need it to, but as of now at least they are paying their way, and with a tweak to the with-holding %'s they can be fixed for a while longer.
  
  America is headed for a financial collapse unless we decide that either we are going to drastically increase income tax levels, or we come to peace with the fact we can't afford to play world police and be all things to all people.
  
  Yet I am sure we all know how likely that is knowing that the 24/7 news cycle and the Dick Cheney's of the world will be plastered all over the TV screaming about how weak we are if the defense budget increases are even slightly slowed down, much less dreaming of lopping the 35% or so that needs to come off it if we really want to start addressing the debt.
  
  We are screwed.

  O=W. Obama acts more like a Republican then Bush did. The expansion of our military is mind boggling under the new guy in power.
• BCSbunk

  IggyPride00 wrote: The perfect illustration of why we are screwed is seen in this years defense budget.
  
  This new healthcare bill the Senate passed in December (which is essentially going to end up being the final bill if it passes) had a cost of $849 Billion over 10 years.
  
  Counting the extra $33 Billion the President just requested for the Afghanistan War, the 2010 defense budget (1 year) when you add up the total of defense spending, veterans affairs, homeland security, interest on debt incurred in past wars and other miscellaneous stuff, we are looking at roughly $900 Billion to $1 Trillion Dollars.
  
  Now we have heard Armageddon is coming financially to this country if the health care bill is passed due to its cost, yet we have heard not a peep from any single politician about the fact the Defense budget for 1 year is going to surpass the cost of the 10 year healthcare bill estimated cost.
  
  If we did defense bills as 10 year budget items like the health care reform bill it would look like a 10 year $10-11 Trillion dollar (probably much higher) bill. It is just not sustainable, and when you look at it cumulatively like that instead of on its own you get a grasp for just how out of hand it is.
  
  I don't think the healthcare bill is a good one by any means, but I am trying to illustrate how we have our collective head in the clouds that no one bats an eye at an almost trillion dollar defense budget for the year, yet for a 10 year bill that is cheaper (projected to be at least) that at least theoretically provides some healthcare for most people we clearly are not looking at the big picture.
  
  In just individual income taxes alone last year, (not corporate, SS or Medicare which have assigned purposes) the government collected roughly $900 or so billion.
  
  While the numbers are rough estimates, we pretty much spent every dollar of income tax we paid on War related things. Not a dime for anything else left.
  
  The defense budget needs to be attacked wtih a machete. The entitlements need it to, but as of now at least they are paying their way, and with a tweak to the with-holding %'s they can be fixed for a while longer.
  
  America is headed for a financial collapse unless we decide that either we are going to drastically increase income tax levels, or we come to peace with the fact we can't afford to play world police and be all things to all people.
  
  Yet I am sure we all know how likely that is knowing that the 24/7 news cycle and the Dick Cheney's of the world will be plastered all over the TV screaming about how weak we are if the defense budget increases are even slightly slowed down, much less dreaming of lopping the 35% or so that needs to come off it if we really want to start addressing the debt.
  
  We are screwed.

  I agree. The defense budget is far too high. I cannot remember exactly, but it is more than the next 15 highest spending countries behind the US if you add them all together.
• Footwedge

  
  I agree. The defense budget is far too high. I cannot remember exactly, but it is more than the next 15 highest spending countries behind the US if you add them all together.

  The US defense related budget approximates ALL of the other country's spending combined.
  
  In addition the US spends more than 4 times the amount on defense related issues than the second highest miltary spending country.
  
  Yet...you have people like Cheney and Hannity clamoring that Obama is linp wristed and cutting defense spending. They are both liars. Numbers don't lie....and these defense numbers can easily be sourced.
• gut

  Footwedge wrote:

  
  In addition the US spends more than 4 times the amount on defense related issues than the second highest miltary spending country.

  Agreed. Chop it in half. I think double the next highest country should be sufficient. Let the rest of the world start picking-up the slack. Of course, the reality is, even when involved in conflict as part of the UN, Americans don't accept high casualty numbers. Most people aren't going to jeopardize their political career by cutting the military budget when we are at war.
  
  Nevertheless, over 70% of the total budget is entitlements and interest on the debt. I don't think you can start reducing the budget without going after entitlements, even if you raise taxes.
  
  We need a constitutional amendment that binds Congress to only spending what it collects. Problem is, it's the same yahoos that won't cut entitlements and so no such amendment gets passed for the same reason.
  
  You can expect to collect about 20% of GDP, which means you might be able to squeeze out $3.0 trillion. We can debate taxes all day, you have compliance issues and effects on the economy, and regardless of rate revenues have been a very flat 19-21% of GDP for decades.
  
  Interest on the debt is already $280B, so we need to balance the budget AND find about $250B surplus to start paying down the debt gradually over 30 years (would get us there, assuming the GDP&revenues grow at 3% inflation). I say cut defense 40% ($200B), get out of the War on Terror ($150B)...Since we are running (rough estimates) @$400B deficit (excluding one-time stimulus), you need another $300B....So cut everything else 15%.
  
  That's the harsh reality. You really can't tax your way out of this. You can go hack up military spending and that's doesn't even quite get you to a balanced budget. To start paying down the debt entitlements have to be cut, NOW, as they might have to be cut further later with all the baby boomers retiring.
  
  Ultimately, I do think we will see some sort of VAT or federal sales tax, gradually increasing over time. The reason is simple: it's a way to tax savings/wealth a second time when it is spent. Effectively a retroactive tax.

• CenterBHSFan

  

  A little off topic, but this thread has got me thinking about it...
  
  About a month ago, somebody put up some numbers of past CBO numbers regarding the projected cost of things like SS and then the actual numbers that panned out.
  Does anybody remember what those numbers were?
• Footwedge

  CenterBHSFan wrote: A little off topic, but this thread has got me thinking about it...
  
  About a month ago, somebody put up some numbers of past CBO numbers regarding the projected cost of things like SS and then the actual numbers that panned out.
  Does anybody remember what those numbers were?

  Unfunded liabilities range between 50 and 60 trillion dollars. By unfunded liabilities, I am referring to contractual agreements in paying for the welfare state..i.e. mainly social security.
  
  At the current pace, the amount of money paid for social issues will exceed the total tax revenues in the year 2039.
  
  Now that might seem like a long, long time from now. But I can remember the year 1980 like it was yesterday.
• ptown_trojans_1

  

  tk421 wrote:
  How exactly is any politician going to steer us in a new direction? No one is going to cut the budget, the spending isn't going to end. We can't borrow money forever, even if China needs a stable America.

  How do you know? In American history, someone or something always rises up and redirects the country, or something happens to steer the country in a new direction. It has happened many times in American history. One example is the rise of Reagan and the new direction he took the country.

  believer wrote:
  
  I appreciate your optimism but based on what I've been seeing on both sides of the political aisle the past 20 years, I'm not feeling warm and fuzzy yet.

  I hate the political situation as well, but again, someone or something always causes a change. While I'm not a supporter, the Tea Party movement has the potential to alter the landscape for both parties.
• Footwedge

  gut wrote:

  Footwedge wrote:

  
  In addition the US spends more than 4 times the amount on defense related issues than the second highest miltary spending country.

  Agreed. Chop it in half. I think double the next highest country should be sufficient. Let the rest of the world start picking-up the slack. Of course, the reality is, even when involved in conflict as part of the UN, Americans don't accept high casualty numbers. Most people aren't going to jeopardize their political career by cutting the military budget when we are at war.
  
  Nevertheless, over 70% of the total budget is entitlements and interest on the debt. I don't think you can start reducing the budget without going after entitlements, even if you raise taxes.
  
  We need a constitutional amendment that binds Congress to only spending what it collects. Problem is, it's the same yahoos that won't cut entitlements and so no such amendment gets passed for the same reason.
  
  You can expect to collect about 20% of GDP, which means you might be able to squeeze out $3.0 trillion. We can debate taxes all day, you have compliance issues and effects on the economy, and regardless of rate revenues have been a very flat 19-21% of GDP for decades.
  
  Interest on the debt is already $280B, so we need to balance the budget AND find about $250B surplus to start paying down the debt gradually over 30 years (would get us there, assuming the GDP&revenues grow at 3% inflation). I say cut defense 40% ($200B), get out of the War on Terror ($150B)...Since we are running (rough estimates) @$400B deficit (excluding one-time stimulus), you need another $300B....So cut everything else 15%.
  
  That's the harsh reality. You really can't tax your way out of this. You can go hack up military spending and that's doesn't even quite get you to a balanced budget. To start paying down the debt entitlements have to be cut, NOW, as they might have to be cut further later with all the baby boomers retiring.
  
  Ultimately, I do think we will see some sort of VAT or federal sales tax, gradually increasing over time. The reason is simple: it's a way to tax savings/wealth a second time when it is spent. Effectively a retroactive tax.

  Good post Gut..especially for a Steeler fan . Unfortunately, as you have described, the situation is completely unmanagable today. It's too late. Mathematically, it cannot be resolved.
  
  Generation theft has been going on for 40 plus years. Once Nixon tok us off the gold standard, there was no tangible reason to live within our means.
  
  Don't get me wrong about Nixon...he had to do that after LBJ implemented his great society programs, all the while funding a war half way across the globe with a country that was no threat to us.
  
  The best way to fund the empire is through the country credit card....at least that's the way they've done it since I've been alive.

• Footwedge

  CenterBHSFan wrote: A little off topic, but this thread has got me thinking about it...
  
  About a month ago, somebody put up some numbers of past CBO numbers regarding the projected cost of things like SS and then the actual numbers that panned out.
  Does anybody remember what those numbers were?

  Here's a great article Center.....after reading this, you'll sleep much better tonight.
  
  http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm
• Cleveland Buck

  

  That's why it is ridiculous to think that any health care bill they pass will cost less than ten times what they say it will cost. You can talk about cutting military spending, which we desperately need to do, but we still can't come close to paying for the entitlements. These crooks are going to keep increasing military spending and keep adding new entitlements, so we are pretty much fucked anyway.
• CenterBHSFan

  

  Footwedge wrote:

  CenterBHSFan wrote: A little off topic, but this thread has got me thinking about it...
  
  About a month ago, somebody put up some numbers of past CBO numbers regarding the projected cost of things like SS and then the actual numbers that panned out.
  Does anybody remember what those numbers were?

  Here's a great article Center.....after reading this, you'll sleep much better tonight.
  
  http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm

  
  Gee, thanks, Footie! What a pal you are!!
• Footwedge

  CenterBHSFan wrote:

  Footwedge wrote:

  CenterBHSFan wrote: A little off topic, but this thread has got me thinking about it...
  
  About a month ago, somebody put up some numbers of past CBO numbers regarding the projected cost of things like SS and then the actual numbers that panned out.
  Does anybody remember what those numbers were?

  Here's a great article Center.....after reading this, you'll sleep much better tonight.
  
  http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm

  
  Gee, thanks, Footie! What a pal you are!!

  Hey...no problem Center. I love being the bearer of great news....and tidings of comfort and joy!!