The US Economy is 19.97 Trillion US Dollars in GDP and California’s economy is the 5th Largest in the world-beating the United Kingdom. That sounds like a country and state that should be wealthy with citizens being happy in the glory of such numbers. However, those numbers will fool you as the United States has lost the middle class that built the nation into an economic power and despair and poverty has replaced the middle class and California has a homeless population of 50,000 in Los Angeles and San Francisco is not the clean urban landscape as homelessness has become a blight to the city that is home to Apple, Google, and Facebook.
According to the US Debt Clock, our government debt is 21,375 Trillion Dollars and $64,625 is the amount of debt to every citizen. Our GDP is almost 20 Trillion Dollars annually and our debt is more than our economic output. How did we get here? In the 90’s, we were running surpluses and paying down our debt. The 09/11 attacks and the recession in lieu of the dotcom crash stopped our paying down our debt. We went to war after the terror attacks and ran deficits to pay for the war and the deficits did not stop and the financial crisis hit and we ran even deeper deficits and borrowing to help America back to growth. During the two terms under Obama, our government debt doubled under a Democratic administration. In 2016, Trump was elected and Republicans held both House and Senate. Republicans were the party of fiscal conservatism or they claimed. Our debt was a problem that needed attention, but a crisis was an event years in the future but the Republican party in less than a month in 2017 (explain later in post) has brought the crisis to the here and now. Both parties have a plan, that is to do nothing on our debt.
Here’s what CNBC said about our current fiscal situation in America:
The Congressional Budget Office confirmed on Monday what many Americans and all politicians already know: the United States is in a deeply precarious fiscal position.
In just one short year, our budget deficit has ballooned by over $1 trillion; by 2028 the accumulated debt is expected to roughly match the size of the economy. If our oversized public debt explodes into a full-blown crisis, no one can say we weren’t warned.
The debt overhang will have real impacts on Americans—imposing higher borrowing costs, changing retirement as we know it and slowing the rate of growth. The plausible options for fixing the situation are diminishing, but fixing it should be a first-order policy priority.
Here’s who will feel the most pain:
First up is any American hoping to borrow. Homebuyers seeking a mortgage. Students borrowing for tuition. Entrepreneurs looking for a small business loan. The 10-year Treasury bill rate has already risen by about 40 basis points this year alone, and earlier this week JPMorgan CEO Jamie Dimon said it could rise by another 120 basis points by year’s end.
The second group facing a bleak future? Retirees. With the ink barely dry on a budget-busting $1.5 trillion tax cut, a group of conservative economists recently proposed entitlement cuts to right the fiscal ship—calls from policymakers are soon to follow.
But there is simply no way to substantially cut these programs without forcing American seniors to work longer and pay more out-of-pocket for health care. If the cost to last year’s corporate tax cut was losing an extra year or two of retirement, Americans should have been presented with an honest choice when the tax bill was passed back in December.
The third casualty affects everyone: future growth. Whether by financial crisis, higher interest rates, or severed spending on public investment, these massive deficits will be a drag on economic growth one way or another. And when the next recession comes (and it will), we may not be able to stimulate our way out of it. America found its way out of the Great Recession in large part through tax rebates and infrastructure spending—these options may not be available if excessive debt is the cause of the slowdown in the first place.
There are plausible exit strategies. Cutting tax expenditures like stepped-up basis or untargeted incentives for retirement saving have long stood as a possible savior to our budget woes. Budget commissions of all stripes have recommended cutting these expenditures as a way to lower the debt, and eventually Congress just might listen.
A second option is one that almost no one talks about: collecting more of the taxes that are owed by taxpayers. Tax evasion costs the Treasury around $400 billion a year, which ultimately amounts to a massive tax on honest taxpayers. Our budget troubles would be solved in a day if tax evaders simply paid their fair share.
In the end, it’s impossible to know how this fiscal imbalance will play out. But at least two things are clear One, the problem got a whole lot worse over the past year. And two, we are not finding our way out of this mess any time soon.
The Washington Post had this analysis:
The Congressional Budget Office last week released its annual budget and economic outlook report, and although the news was gruesome, the report was greeted in Washington with a giant yawn. The assumption among Republicans and Democrats is that the political rewards for curbing runaway budget deficits are too meager to justify the risks. There’s a consensus to do nothing — and to hope that nothing goes disastrously wrong.
From 2019 to 2028, the federal government will run cumulative annual deficits of $12.4 trillion. The deficits — the gap between what government spends and what it collects in taxes — average about 5 percent of the economy (gross domestic product, or GDP). Since 1950, deficits have equaled or exceeded 5 percent of GDP in only six years (1983, 1985 and 2009-2012), and most of these occurred after deep recessions. These reduce tax revenue and boost “safety net” spending (unemployment insurance, food stamps and the like).
The news of America’s pending financial obilivion was viewed with little reaction by Congress because the political risks to their power is too great to be proactive and save our country from a Venezuela style of collapse on millions of steroids. Our representatives know what is going on in Venezuela and the suffering of the population living through an economic collapse because of debt that became a crisis when oil prices collapsed in 2014. Congress is a political leadership that cares about their hold on power and not the well being of Americans. Power is such a priority that Financial Armageddon is a risk worth taking. Americans better become more than voters in this upcoming midterm elections. Our President has term limits to keep a check and balance on centralization of power. Our Founding Fathers could not imagine Congressional representatives would have the physical capability to spend 50 years in office with an election race every 2 or 6 years that require big money to challenge and gives advantage to the incumbent that skips accountability from the voters and no term limits gives this legislature a hold on power. We have the rights to demand such items from our representatives. They will resist and mock term limits but Congress is driving our country into the financial abyss….,Our children will grow up in something worse than the Great Depression is we don’t stop this madness. Congress or collapse, the status quo gives us two choices.
AS AN AMERICAN, I DEMAND CONGRESSIONAL TERM LIMITS AS PART OF THE MIDTERM DEBATE AND DECISION…….