This catastrophe has been a long time in the making. In 1993, for instance, the annual deficit amounted to 3.8% of GDP, and the debt, which seemed astronomically high at a “mere” $4.4 trillion, was Lilliputian by today’s standards.
The trend goes back longer than that. The growth of the U.S. government in modern times is the story of post-WWII America. President Dwight Eisenhower seems to have been the last guy in the post-WWII era who understood that the welfare state, the warfare state, and tax cuts not backed by tough spending cuts are incompatible with fiscally responsible government, or at least with reasonably-sized government. His predecessor, Harry Truman, who had funded the Korean War effort, left Eisenhower a level of federal spending equivalent to 18.5% of GDP. Between then and now, both parties, with short-lived exceptions, have pushed both the defense and domestic budgets exponentially higher.
Lyndon Johnson took spending to 19.6% of GDP; Richard Nixon and Gerald Ford to 21.5%; Jimmy Carter to 21.8%; George W. Bush to 21.9%; Barack Obama to 24.9% (before bringing it back to 21.9%); Donald Trump to 31.3% (during the COVID-19 meltdown), and Joe Biden to 31.7%, although now it has come down to 22%.
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It’s now come down to this. Unless a new generation of leaders has the courage to cut such “untouchables” as the defense, education, justice, and homeland security budgets, and privatize the Social Security program (as more than 40 countries wisely have done), sooner or later, the current trajectory of federal finances will lead to an extremely ugly place. If you think things are bad now, just wait.
I need an underground bunker on a farm in Idaho.
Strangely, the numbers at the link from FRED (FYONGDA188S, aka Federal Net Outlays as Percent of Gross Domestic Product, Percent of GDP, Annual, Not Seasonally Adjusted) do not match what the article says. That does not inspire confidence.
All this presupposes that the numbers you’re working with are honest in the first place? I mean if your measuring GDP by throwing in Wall street/big tech/green energy project-projections/banking debt export/imports that are manipulated, subsidized, and leveraged to the hilt? (What else are we producing besides leverage bullshit?)
Your GDP ain’t working in the real world. (The price of everything).
But Joe-pedo cut his spending from 31% down to 22% of GDP. So, we must be doing great, like we get told all the time, right?
Even though he is borrowing a trillion dollars every 100 days to pay a trillion in interest every 100 days.
Which means the vig is getting laid back on the principal. (Isn’t that how loan-sharking works?) And by extension someone like Tony Soprano is getting a trillion dollars to finance his criminal enterprises every 100 days. (Wait till the vig gets increased because you’re a bad risk, for not paying the principal.)
You can’t borrow money to give to welfare patients to spend on food and housing, then say the food and housing GDP numbers you’re working with are correct.
Right now, our country has one foot in the grave and the other on a banana peel. And not just economically.
“This catastrophe has been a long time in the making.”
Not really, it was a forgone conclusion the minute someone decided to give politicians a credit card.
In the words of the fabled money preacher from the 70’s, Reverand Ike.
“Bad credit never ruined anyone. Good credit can ruin you with a signature.”
The nice thing about loan-sharked loans is all you have to do to get out of paying is go shark hunting.
Don’t worry, I’m sure we can all retire in style, because as long as Uncle Sugar can keep on sending out those sweet, sweet, SS bucks, it’s all gravy, right?
Oh, wait a minute… https://www.zerohedge.com/personal-finance/retirement-nightmare-hordes-older-americans-may-need-go-back-work-just-survive
Then we can just live on savings, because under Biden’s stellar economy, we can… oh, hang on a sec. This just in: http://zerohedge.com/personal-finance/visualizing-how-long-each-generation-can-survive-without-income
Yeah, I’m sort of expecting the kids to be living with us for a while.
Funny … None of those “untouchables” are entitlement spending; they are actually discretionary. And, in theory (looking at you, education) we get some value back for money spent.
Last I checked, if we zeroed out all discretionary spending (which actually relates much better to the gov’s actual mission) we’d still be in the red from entitlement spending.
Exactly.
We are nearing the end-game. The choices are all ugly.
1A- Repudiate the debt, and just write it off.
1B- Monetize the debt.
1C- Massively cut spending, keep taxes largely as-is, and continue to crush people into debt-slavery forever just paying the interest.
2A-Jack up taxes to fund liabilities like SS, Medicare, etc.
2B- Cut things like SS hugely to match revenue
2C- Means-test and asset strip (i.e., “force them into poverty”) before people are eligible to collect “entitlements.”
And of course, there is plan 129-Z/3, which they’ll never consider, because it might actually solve the problem.
Debt jubilee and require all government spend within revenue
Seal the borders and eject all illegals, anchor babies, nearly all “guest workers,” change the marriage laws so they don’t screw men so reliably and hard, require most mega-corps to spin off everything that isn’t a core asset and downsize, making most corporations relatively small and local, tax financial profits at 90%, and profits on actually making and doing things people want at a flat 10%, make debt-leveraged take-overs illegal, audit most current and former politicians and their relatives, and hang all the ones that abused public trust, make the Epstein client list public, prohibit anyone on public assistance of any kind from voting, and make committing a crime a deportable offense for any immigrant (and that especially includes welfare fraud), tax foreign workers at 100% (basically matching their salary, to be paid by the corporation hiring them), ending the Fed, rigorously enforcing the 8th and 10th Amendments, and passing a new one “No person with duel citizenship, expressed or implied, shall have any job in government at any level, elected, appointed, hired on, contracted out, or sub-contracted for, or be employed in any position in important physical, economic, or cultural infrastructure or influence, to include banking, law, k-12 public or higher publicly-funded education, media, military, transportation, publishing, government, and other fields as indicated.”
Rolf –
Good list. Excellent list, actually.
Now let me know how you’ll achieve any of this with the standard-issue and perpetual crop of liars, cheats, thieves and whores in Congress and zero enforcement of Constitutional compliance, with emphasis on from where demand for Constitutional compliance might come. (I’ll deduct points for any use of fission or fusion, but pitchforks and torches are on the approved list).
While I’m waiting I’ll move my money out of gold and into popcorn futures…….
It is not just the Federales. We have seen a massive expansion of state and local government too in the same time period. Especially education (aka teacher salaries). That will probably hit the fan first since state and local governments can’t print money.
” That will probably hit the fan first since state and local governments can’t print money.”
As long as the “tax dollar merry-go-round” from D.C. props up state malfeasance, there’s little need for pecuniary discretion in the Fifty. But cut off the supporting funds from the fed dot gov and watch the states scramble and very suddenly embrace frugality. It will be particularly fun in some of the cities because of their addiction to “someone else’s money.”
The big bomb is pension systems. At all costs, bailouts there must be prevented. It would be nice if we had an opposition party.