The US Approaching Insolvency

According to a Federal Reserve official, we are:

“If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when,” Dallas Federal Reserve Bank President Richard Fisher said in a question and answer session after delivering a speech at the University of Frankfurt. “The short-term negotiations are very important, I look at this as a tipping point.”

A big part of the blame is on Congress. Both parties had a hand in it, but the Pelosi Democrats and the Obama Administration have made things much, much worse than anyone before them including Bush as the chart shows.

And a large part of this problem has also been the Federal Reserves policies. But a driving force has been the unfunded liabilities that stem from entitlements. All the major countries in the world are learning the hard way that governments cannot provide for a welfare state. As this lengthy article in the National Journal puts it:

All over the developed world, nations are coming to terms with the fact that the social-democratic welfare state is turning out to be untenable. The reason is partly institutional: The administrative state is dismally inefficient and unresponsive, and therefore ill-suited to our age of endless choice and variety. The reason is also partly cultural and moral: The attempt to rescue the citizen from the burdens of responsibility has undermined the family, self-reliance, and self-government. But, in practice, it is above all fiscal: The welfare state has turned out to be unaffordable, dependent as it is upon dubious economics and the demographic model of a bygone era. Sustaining existing programs of social insurance, let alone continuing to build new ones on the social-democratic model, has become increasingly difficult in recent years, and projections for the coming decades paint an impossibly grim and baleful picture. There is simply no way that Europe, Japan, or America can actually go where the economists’ long-term charts now point — to debts that utterly overwhelm their productive capacities, governments that do almost nothing but support the elderly, and economies with no room for dynamism, for growth, or for youth. Some change must come, and so it will.

Bureaucracies cannot run things reasonably well. Especially over long terms. The longer a bureaucracy exists, the larger and more corrupt it gets. It is an inevitable reality which is why there should be an amendment to the constitution that limits the size of government to a small percent of the GDP. That would force them to live within their means, but give them an incentive to help the GDP grow instead of allow them to harm it as they are now.

We cannot continue the way we’re going. Look at the chart in that article to see what that actually means.

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6 Comments

  1. This makes so much sense…! However, you know the dummies that live from hand-out to hand-out and Progressive ideologues will never accept reality! They have this belief that people have an endless ability to pay taxes and that the next scheme to raise taxes under peoples’ noses will pay for the mess THEY created in the first place! It’s never about restraint or logic with these people.
    Sad to say, I have people like that in my family. There are a lot of women in particular who runs their lives by “what they feel.” Self–hating people do that, too. This includes a lot of men who are inexplicably drawn to feminists (in the worst sense; they’re male black widow spiders and we know what happens to them!) as well as people who take advantage of situations to their benefit.
    Many, many of the people that have been lionized as great political leaders of the Left the past 40 years were huge crooks. They sure never paid their “fair” share of taxes!

  2. This makes so much sense…! However, you know the dummies that live from hand-out to hand-out and Progressive ideologues will never accept reality! They have this belief that people have an endless ability to pay taxes and that the next scheme to raise taxes under peoples’ noses will pay for the mess THEY created in the first place! It’s never about restraint or logic with these people.
    Sad to say, I have people like that in my family. There are a lot of women in particular who runs their lives by “what they feel.” Self–hating people do that, too. This includes a lot of men who are inexplicably drawn to feminists (in the worst sense; they’re male black widow spiders and we know what happens to them!) as well as people who take advantage of situations to their benefit.
    Many, many of the people that have been lionized as great political leaders of the Left the past 40 years were huge crooks. They sure never paid their “fair” share of taxes!

  3. Your closing constitutional ammendment won’t work as intended in a federal republic model. The most likely seeming effect of a federal size limitation would be to tax at that level but spend at the state and local level. The effect would be equally (if not more) massive bureaucracies, funded at thew federal level but “managed” at the state or local level. Even bigger government with even less direct control! Remember, our Constitution only exerts direct control over federal government structure and specifically delineates taxing and spending authority to the federal Congress (originating in the House). The arrangement I project wouldn’t seem to conflict with any of that and is almost certainly the opposite of your intent. Finally, the Federal Reserve Bank structure is, in larege part, one of the primary causative factors in the present economic crisis; expecting them to offer structural change that might in any way diminish their current levels of control and power is … not very likely.

    • The Constitution supersedes the state constitutions. But state governments are supposed to rule their affairs in areas the federals don’t control, My idea would restore that power to them because the feds have taken too much power away from the states. But states could only be as big as they could afford, California is an example of a state exceeding their grasp and is doomed to fail.

      States would be in competition with each other to be more attractive places to live, as they should be., At one time California was like that. I remember. Now it is hostile to business and in many ways, to its citizens. .

      You’re right though, the policies of the Federal Reserve system has had a massive impact on our economy in many different ways including inflation, the recession and depression.

      • James

        When you said;

        Bureaucracies cannot run things reasonably well. Especially over long terms. The longer a bureaucracy exists, the larger and more corrupt it gets. It is an inevitable reality which is why there should be an amendment to the constitution that limits the size of government to a small percent of the GDP. That would force them to live within their means, but give them an incentive to help the GDP grow instead of allow them to harm it as they are now.

        … I took you to mean that you wanted bureaucracies to be reduced in size and, thereby, the government to be reduced to a more managable and responsive size.

        My observation was that the ammendment you seemed to suggest would likely not have that effect, but would result in the simple transferrence of existing bureaucracies from the present centralised federal format to each being replicated in each State’s government instead. The then-State EPA, OSHA, TSA, Soc. Sec., etc would be funded in large part by federally collected tax monies (and so would exceed any single State’s ability to fully fund operations on it’s own) because the Constitution specifically granted authority to tax and spend to the House of Representatives.

        If the USG taxed at 3 times it’s (per your suggested ammendment) necessary level and then spent much of it’s time dickering over which State got how much of the 2/3’s it couldn’t spend on federal activities, the effect would be an even larger bureaucracy in total with less direct control over same vested in any single level of elected government. A work-around of this nature would keep the same access to financial and other support located within the same group of political interests as exists today – all while providing an additional layer of obfuscation. The public employee’s unions would still get to give money to the pol’s that paid them more of our taxes, etc, etc.

        I don’t disagree with your intent (as I understand it), I just don’t think it resolvable so easily is all. Humans are very good at protecting their own interests, even in the face of explicit opposition, and politicians exist to exert our collective power to their individual benefit and our’s only a distant second.

        • My argument was that the size of the federal government should never exceed, say 15% of the GDP. I think it should be 12% max, personally. But now it’s like 25% or more. That’s still more than generous.

          They should also be limited by how much they can tax, Two different arguments. I am for a flat tax, but regardless. Some states might be willing to do as you suggest. Others wouldn’t. For the government to try to impose that sort of thing on the states would meet a lot of opposition. It would not be a sure thing. Some states like California have their own versions of federal agencies now, but those states are in trouble and at some point, that will have to change. So I am not sure your argument would work, though its an interesting point.

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