Economic Chaos Ahead

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Let’s think about the kind of mess that we’re in. Federal 2010 Medicare and Medicaid expenditures totaled $800 billion. The projected annual growth of both programs is about 7 percent. Social Security expenditures are more than $700 billion a year. According to the 2009 Social Security and Medicare trustees reports, by 2030, 49 percent of federal revenues will go for Social Security and Medicare payments. The unfunded liability of both programs is already $106 trillion.

But not to worry. The Congressional Budget Office estimates that it’s possible to sustain today’s level of federal spending and even achieve a balanced budget. All that Congress would have to do is raise the lowest income tax bracket of 10 percent to 25 percent and the middle tax bracket of 25 percent to 66 percent and raise the 35 percent tax bracket to 92 percent. That’s a static vision that assumes that people will have no response and they’ll work just as hard and send more money to Washington. If Congress did legislate such tax increases, it would be the economic equivalent of committing national hara-kiri.

Professor Daniel Klein, editor of Econ Journal Watch, and Professor Tyler Cowen, general director of the Mercatus Center, both based at George Mason University, organized a symposium to promote a better understanding of the U.S. debt crisis. The symposium’s title, “U.S. Sovereign Debt Crisis: Tipping-Point Scenarios and Crash Dynamics” (http://econjwatch.org), is a strong hint about the seriousness of our nation’s plight.

Professor Cowen introduced the symposium pointing out that in 2011, the major crisis was in the eurozone, where Greece, Italy, Spain, Portugal and Ireland dealt with the risk of default. The survival of the eurozone is now seriously doubted. Cowen added: “When it comes to a sovereign debt crisis, it is no longer possible to say ‘it can’t happen here.’ Right now, we are borrowing about 40 cents of every dollar the federal government spends, and the imbalance has no end in sight.”

Jeffrey Rogers Hummel, associate professor of economics at San Jose State University, says that a default on Treasury securities appears inevitable.

He says that the short-run consequences for the economy will be painful but that the long-run consequences, both political and economic, could be beneficial. That’s because an economic collapse is the only way we will come to our senses. That’s a tragic statement about the foresight of the American people.

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  • coldwaroverornot

    "The Main Enemy" of the Comintern, the Warsaw Pact nations and China, is the United States of America. Nothing has changed in almost a full century, except that this President Obama owes his loyalty to the Comintern and he committed perjury upon taking the Oath of Office that he was not qualified to hold either by citizenship or experience. His one talent, is the demagogy of a BS artist. Every time he opens his mouth lies come out. It is no longer certain that anything short of blood running in our streets can reverse the tide of folly we have earned for ourselves.

    • coldwaroverornot

      If the cold war is over, who won it? What did the winner win? Why is Putin still the dictator? Why is it that not a single one of the candidates for President has even mentioned our potentially fatal blunder of being blind to the looming death of the Republic at the hands of both our sitting President and his favorite foreign friends?
      Why do all the Democrats and Ruth Bader Ginsberg support this deadly plot?

  • J Rabinowicz

    Your title should be Economic Collapse Ahead. The Chaos will follow, and as usual it'll be a chaos among citizen and people. By the way, America has now the more or less the same internal problems as the Roman Empire had before collapsing. With the difference, today, everything is quicker.

  • NotaBene

    I assume your solution is to cut taxes and spending? funny thing about austerity; it never works.

    • truckwork

      Cutting tax rates has worked, bringing in higher total revenue every time it's done. Even John Kennedy lowered high tax rates and increased total revenue. "In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now."

      Lowering tax rates in the 1920's led to an increase of total revenues by more than 61 percent.

      In the 1980's income tax rates were reduced and this led to an increase of total revenues by more than 99 percent.

      Most important is that when tax rates particularly for higher income bracket individuals are lowered, they pay more in tax revenue, thereby reducing the tax burden on the lower income brakets. <a href="http://(http://www.heritage.org/research/reports/2003/08/the-historical-lessons-of-lower-tax-rates)” target=”_blank”>(http://www.heritage.org/research/reports/2003/08/the-historical-lessons-of-lower-tax-rates)

      Now I've provided some facts, how about you?

  • elihu

    The reason the government will not change anything, but rather continue in their increased deficit spending, is because this entire default/downgrade to the US is/has been engineered. Planned and set up years ago…to accommodate the Globalist agenda….