It gets worse. So far I have assumed that people are still willing to loan the US money. Unlike US voters, foreign investers are not stupid. They see the growing debt and the SS crisis. On top of that the dollar is sliding badly against foreign currencies. All we need is one medium-sized country to decide that their US investments are better placed elsewhere. This would set off a major sell-off of US bonds leading to a crash in the bond market. In order to generate more income the Fed would be forced to hike interest rates and effectively kill the domestic money supply (those home re-finances have been fueling our economy over the last decade.)
I think the prospects for a currency crash and a '30s syle depression are way too real. But on the bright side, I'm sure if somebody points this out to our fearless leader he will take steps to correct it.
Proposed 2005 budget is 2 trillion dollars Estimated 2004 Budget deficit 500 billion dollars. 2004 National GDP roughly 11.5 trillion 2004 National Debt as a percentage of GDP 66% 1996 National Debt as a percentage of GDP 67% 1930 National Debt as a percentage of GDP 25% Deficit as a percentage to GDP for 2004 is 4.5 roughly equal to 1992 and below much of the 80's where it peaked at 6% under Reagan.
Office of Budget and Management: Budget Totals Deficit as a percentage to GDP
First and foremost is that the deficit is much larger than you think it is, this years deficit is listed at about 420 billion, however the FEDS are not telling you how much they took out of the trust fund in order to get it to that level. This is 250 billion dollars that has to be paid, this 250 billion dollars was replaced by IOU's and in addition to the national debt will have to have interest paid on it also.
Second, we have run deficits and debt ratios larger than this, look at the period of WWII as an example, however, if you look at the historical tax rates you'll notice that we as a nation sacrificed by paying our own way and getting those deficits under control and paying the debt off.
This is something that the Republicians will not ever do lest they lose their hold on rural America, they have painted themselves into a fiscal box that they cannot possibly get out of.
Third, up until the 80's we were not a net debtor nation for trade and ran a trade surplus for all of those years, the additional impact of the trade deficit is huge and not a scenario we've faced before.
Fourth, all of that income re-distribution from 1950 on in the form of those high tax rates, resulted in the largest middle class in world history. Since 1980, we've seen that middle class shrink and shrink and shrink, all the while there is ever growing wage imbalances as less and less income as a percentage of the total is made by larger and larger percentages of the population. In short, your eroding the tax base.
Doing the numbers there, that means that when the interest payments on the debt reach 1/2 trillion, nearly 70% of the population will work their entire year paying nothing but the interest on the federal debt.
Fifth, believe it or not, we're about to enter a period where the workforce is going to shrink as the age ratios significantly change in the next 20 years.
Sixth, never believe the Governments numbers, they are flat out lies, you can get a great priner on this at Gillespies Website or you could visit the Grandfather Economic Report and get another great view on how our government lies to us.
Actually I could go on here, however IMHO, the issue is a moral one, it's morally wrong to pass these costs on to the generations that follow us, period, end of discussion. We cannot reasonbly be expected to make good decisions on whom we vote for unless we ourselves are affected by the decisions they make. That's why the Republicians are winning, because they do things and refuse to make the people voting for them accountable in the form of taxes and or the spending cuts that come with their policies.
Look at those tax rates above, those generations, in addition to fighthing 3 wars during that period paid their own way and built the greatest nation on earth in doing so. We instead bitch and moan about how we're an over-taxed society while sending our soldiers off to fight a war that we want our children to pay for...
