Back in February 2011, Mary Meeker, a partner in the legendary Kleiner Perkins venture capital group, put together a PowerPoint presentation that analyzed United States finances as if it were a corporation.
The bottom line: We are blued, screwed and tattooed (Yes, for some reason we involuntarily resorted to World War II slang. It just happened. We can’t explain it).
The presentation clearly shows that our biggest problems are Social Security, Medicare, and Medicaid. Put together, they are not only far more expensive than any other budget items, they’re growing faster, too. Double whammy.
Business Insider summarizes the most important slides from Meeker’s report:
It hasn’t happened since the Great Depression, but we now find ourselves in a situation where the U.S. government is handing out more benefits to households than they are taking from them in taxes. If your first thought is that, of course, that’s because we aren’t taxing those damn rich people enough, please leave now, you’re causing a foul smell on my blog.
Elizabeth MacDonald of Fox News has penned a clear piece of work today that presents the big picture problem of just how far off-track our once proud capitalist America has gone.
In 2010, households were taxed $2.2 trillion, but raked in $2.3 trillion of goodies, from the usual big ticket programs like Social Security, Medicare and Medicaid, to one-time programs like stimulus spending, to supporting illegal aliens, to thousands of absurd giveaways you probably don’t even know about like millions of cell phones free from the government for the poor and illegal. An estimated 59% of the 308.7 million Americans get at least one federal benefit, according to the Census Bureau, based on 2009 data.
What’s really disturbing is that the handouts have been growing, and people are becoming more and more addicted to their programs. Get a load of this statistic: since 2007, 79% of household growth is attributed to government cash handouts. Just to be clear, yes, I am talking about the United States of America, not Europe who is now going in the other direction.
Why do you have to so negative all the time? Why is your glass half-full? These are the questions I get often from friends. The problem must be that I’m not drinking the Kool-Aid like most of the country. IF you’re reading this blog, you know what I mean. Without the benefit of the Kool-Aid, it’s too easy to clearly see all the effed up things going on in the world and particularly in our own country — and the insanely stupid or socialist leaders in our government.
As for our leaders. the optimists say that the rising tide of the angered citizenry will overthrow the leftist and morons in office, and change will be on the way, righting our ship before it sinks into the sea of history. If we ever get to the point of massive political change, it will be too late — we need leadership now, the congressional numbers and the political will make drastic changes, NOW. But that’s not going to happen — this nation of whinners and as Ayn Rand calls them, looters, won’t give up their goodies and the politicians that deliver them. Yes, you and I would, but not the rest of them.
With moronic leaders in mind, if you don’t know her yet, I’d like to introduce Congresswoman Eddie Bernice Johnson from the once great state of Texas. You see Ms. Johnson doesn’t care that we have no money and are in debt up to our eyeballs. Nope, she doesn’t need to care, because she has something that trumps trillions in debt: she has the vision thing. She can’t articulate it beyond “investing” in research and education, but she’s got it man, she’s got vision! And she knows just who will pay for it.
With people like Johnson in congress, and voters in her district likely to keep her in office for life, it’s no wonder you and I are not very optimistic about our future.
Wisconsin Republican Representative and Chairman of the House Budget Committee Paul Ryan unveils his budget proposal today, and finally, damn it, someone is getting serious. His budget calls for slashing the debt by $4.4 trillion over the next 10 years. The House Budget Committee has posted this video called “The Path to Prosperity” in which Ryan visually walks you through our fiscal problems.
Get ready for the charges of the GOP wanting to kill children and seniors, and pollute the earth. Oh wait, they already started last week.
Reason columnist and Mercatus Center economist Veronique de Rugy busts four myths about the deficits and the debt.
Myth 1: Debt and deficits are a disease that can only be cured by raising taxes.
Fact 1: Debt and deficits are only a symptom. The disease is overspending. And tax increases are no cure. Besides, even if we could balance the budget by raising taxes it wouldn’t stay balanced so long as programs like Social Security, Medicare, and Medicaid remain unreformed.
Myth 2: There is no relationship between high interest rates and deficits. And even if there was, interest rates remain at all-time lows.
Fact 2: That may have been true once, but the data now shows that investors anticipate an increase in both interest rates and deficits.
Myth 3: Debt and deficits may be a problem, but we don’t have to fix it now.
Fact 3: Debt and deficits are having an immediate negative impact on the economy.
The government could shut down! The government could shut down! Okay, I hear you. Now, please DO IT. I can’t think of anything better. And the American people are just fine with this. For the first time ever, a Rasmussen poll finds that a majority of voters don’t mind shutting down the government if it leads to more tax cuts.
Did you hear that Republicans? Don’t let Harry Reid and Chucky Schumer scare you out of standing up for spending cuts, in the magnitude that was promised during last November. Don’t worry that the democrats they’ve planned, synchronized and aimed their fabricated name calling of “Extremist” at you. If that’s Extremist, 57% of us are extremist.
This budget, this debt, this deficit, these are what are extremist.
A majority of voters are fine with a partial shutdown of the federal government if that’s what it takes to get deeper cuts in federal government spending.
A new Rasmussen Reports national telephone survey finds that 57% of Likely U.S. Voters think making deeper spending cuts in the federal budget for 2011 is more important than avoiding a partial government shutdown. Thirty-one percent (31%) disagree and say avoiding a shutdown is more important. Twelve percent (12%) are not sure. (To see survey question wording, click here.)
DON’T WUSS OUT Republicans, or 2012 will make 2010 look mild, and you’ll be out of a job.
Bill Gross is out with his April 2011 Investment Outlook. As always, it’s a most definite must read. Earlier this month he told the world that he had dumped ALL of his U.S. treasuries from Pimco’s flagship Total Return Fund, the world’s largest bond fund, in the month of January. In this latest newsletter, he continues to rip on the financial condition of America which he says is out-Greeking the Greeks.
He sets the stage: “75% of the budget is non-discretionary and entitlement based. Without attacking entitlements – Medicare, Medicaid and Social Security – we are smelling $1 trillion deficits as far as the nose can sniff.” Something we all know, but those in D.C. don’t want to talk about.
The, he zeros in on those entitlements:
Suppose that the $65 trillion of entitlement liabilities were fully funded in a “lockbox,” much like Social Security is falsely imagined to be. Just suppose. And say the cost of that funding (Treasury debt) was the same CPI + 1% that was used to produce the above discounted present value in the first place. Actually, that’s not a bad guesstimate for the average yield of all Treasury debt. If so, then the interest expense on the $75 trillion total debt would equal $2.6 trillion, quite close to the current level of entitlement spending for Social Security, Medicare and Medicaid. What do we pay now in interest? About $250 billion. Our annual “lockbox” tab would rise by $2.35 trillion and our deficit would be close to 15% of GDP! The simple conclusion would be this: Unless you want to drastically reduce entitlement spending or heaven forbid raise taxes, then Pepé, you’ve got a stinker of a problem.
Previous Congresses (and Administrations) have relied on the assumption that we can grow our way out of this onerous debt burden. Perhaps we could, if it was only $9.1 trillion, as shown in Chart 2. That would be 65% of GDP and well within reasonable ranges for sovereign debt burdens. But that is not the reality. As others, such as Pete Peterson of the Blackstone Group and Mary Meeker, have shown much better and for far longer than I, the true but unrecorded debt of the U.S. Treasury is not $9.1 trillion or even $11-12 trillion when Agency and Student Loan liabilities are thrown in, but $65 trillion more! This country appears to have an off-balance-sheet, unrecorded debt burden of close to 500% of GDP! We are out-Greeking the Greeks, dear reader.
Gross says there is no way, no how we cannot grow out of this mess. The only way to get our house in order is to cut entitlement spending. Period. That’s where the money is.
He ends his letter by telling readers what he’d say if he were to be able to give testimony to congress on the current debt crisis:
“I sit before you as a representative of a $1.2 trillion money manager, historically bond oriented, that has been selling Treasuries because they have little value within the context of a $75 trillion total debt burden.
“Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates. Our clients, who represent unions, cities, U.S. and global pension funds, foundations, as well as Main Street citizens, do not want to be shortchanged or have their pockets picked. It is incumbent, therefore, in order to preserve the integrity of the U.S. Treasury market along with its favorable global interest rates, and to promote a stable U.S. economy, that entitlement spending be reduced, and that future liabilities be addressed in terms of healthcare and Social Security cost containment. You must attack entitlements and make ‘debt’ a four-letter word.”
Everyone knows President Obama isn’t serious about cutting spending, right? Disappointingly, no. I thought that most people could see through his bullshit, but a survey I saw reported on the news today concluded that 52% of respondents believe he is in fact serious, and get this: only 44% of respondents believe the Republicans are serious about it. There’s a huge disconnect from reality in those numbers. But at least Ron Paul knows how serious Obama is.
Here’s an idea to close the deficit: What if we get rid of national defense, interstate highways, national parks, homeland security, and all other discretionary programs. Just rip them right out of the budget. Yeah, that ought to do it.
Actually, no. It would not do it. You see, even if we didn’t spend a penny on discretionary programs, we’d still spend more than we take in this year. That’s how effed up we are.
Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.
Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.
I knew, you knew it, but the clueless politicians in Washington have just now heard it: while politicians try to find a few pennies to cut from the budget, the U.S. government waste billions. In fact, according to a new Government Accountability Office report they are wasting up to $200 billion a year funding overlapping programs in the 15 different agencies overseeing food-safety laws, more than two dozen separate programs to help the homeless and 80 programs for economic development.
The WSJ says “the agency found 82 federal programs to improve teacher quality; 80 to help disadvantaged people with transportation; 47 for job training and employment; and 56 to help people understand finances.”
Thanks to Sen. Tom Coburn (R., Okla.) for pushing this report through. But, I have a feeling this will be the last we ever hear of it. Nice try, but the government does not defund itself.
Sens. Sherrod Brown (D-Ohio), Patrick Leahy (D-Vt.), and John Kerry (D-Mass. are Citizen’s Against Government Waste’s Porkers of the Month for January 2011.
Politicians can get away with robbing us taxpayers blind because they know the vast majority of Americans are financially illiterate. And it doesn’t help that the media — from the mainstream media to the cable news networks — dumb us down with their pitiful coverage of economic issues.
MSNBC provided a fine example of this this week, when they explained the debt ceiling in a performance barely worthy of a second grade audience. Watch MSNBC reporter Richard Lui as he plays the role of “spending” and acts out hitting and raising the debt ceiling.
The Debt Ceiling: It’s not that difficult of a concept for us viewers, but perhaps it is for the folks at MSNBC.
Top White House economic advisor Austan Goolsbee warned yesterday on ABC’s “This Week” that failure to raise the debt limit this coming February would be “catastrophic.”
The debt limit sits at $14.3 trillion. Maybe I’m just not getting it, but that sounds like an awful lot of money to me. The total debt has increased over $500 billion each year since fiscal year 2003, with increases of $1 trillion in FY2008, $1.9 trillion in FY2009, and $1.7 trillion in FY2010. Isn’t it time we stopped the madness?
Not according to Goolsbee. In fact, he doesn’t even think we should be talking about it:
“It pains me that we would even be talking about this. This is not a game. You know, the debt ceiling is not something to toy with. … If we hit the debt ceiling, that’s essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008.”
He continued:
“If we get to the point where you’ve damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity.
“We shouldn’t even be discussing that. People will get the wrong idea. The United States is not in danger of default. … This would be lumping us in with a series of countries through history that I don’t think we would want to be lumped in with.”
But thankfully Republicans have finally found some backbone and have other ideas, and hopefully will be able to slow the out of control spending (yes, I know, Bush was a HUGE spender too). Here’s Minnesota Congresswoman Michele Bachman responding on CBS’s “Face The Nation” yesterday:
“At this point, I am not in favor of raising the debt ceiling. Congress has had a big party the last two years. They couldn’t spend enough money and now they’re standing back, folding their arms … taunting us about how are you going to go ahead and solve this big spending crisis?”
Meanwhile, Republican Senator Lindsey Graham of South Carolina on NBC’s “Meet the Press,” said he would not vote to raise the debt ceiling unless spending is cut back to 2008 levels.
“To not raise the debt ceiling could be a default of the United States on bond and Treasury obligations. That would be very bad for the position of the United States in the world at large. But this is an opportunity to make sure the government is changing its spending ways.”
Maybe this is just too complicated a matter for Mr Goolsbee. Maybe he’s never had a credit card that was maxed out. When you’ve maxed out your credit card, you are supposed to find ways to cut spending, and — oh, the horror! — try to even pay down the debt. A person or family does not have the ability to magically raise their credit limit like the government. Sure, there is hardship. But, that’s life.
The Federal government needs to do the same thing. Of course it will be tough, but Mr. Goolsbee, we Americans are tougher than you think. Let’s get this pain over with now instead of kicking the can down the road until we have a complete economic collapse from which we will not be able to recover.
If not raising the debt ceiling will cause a catastrophe, what’s the point of having a debt ceiling?
R. Arthur Beckles: Barack Obama is President of all Americans, not just of African-Americans! It’s difficult for all working class Americans – black, white, brown, etc. African-Americans who don’t want to vote for Obama, can feel free to do so. But do they think that their lot...
keith: wow. Whos got the bigger stick, My @!(k is bigger than yours, your country my country, my countries poor is richer than yours. the truth of it is that in the end the civilians are going to feel the brunt of this economic downfall. i live in the U.S. and there are over 200 multi...
Anonymous: I agree with many of the above. I know people from both the US and Europe that are on disability because of health problems and the one person in Europe is receiving much more help than are the US citizens.
Sunday: BTW, before you ask why two adults only received $240 a week for unemployment, just remember that you can only receive unemployment if you were laid off. If you were fired or quit, you cannot receive unemployment. In my case, I got ill, and FMLA only applies to people who have worked at a...
EriktheRed: I like how it’s “fortunate that the crisis is confined to the E.U.”- what’s unemployment in the U.S. right now? How about the millions of foreclosures you’ve had already? Tent cities, anyone? Deficit spending at $3.5 bn a DAY? HMM!
David, Self Defense Retailer: Really? Why in the world are they doing that for Gitmo detainees? A whole soccer field? Outrageous! Maybe the EU really won’t last.
David, Stun Gun Supplier: It’s the next bubble. I wonder what Romney has to say about this. Obama’s made himself clear in his typical way. It’ll probably be worse than housing when it does.
See I told you: Who didn’t see this coming . Put a communist organizer in the White house and just wait. To bad the American populace lacks true intellect or is it just that the dummies out number the smart 20 to 1. Probably the latter. Obvious who controlls the vote with those kind of...
James: After a seriously obese person has had fat removal procedures, his/her flesh sags where excess fat used to be. World population should never have risen this high. It will be reduced. Through lower birth rates; or by more traditional means: war, disease, famine, cannabalism. I’m not a...
JoAnn: I have a real problem with Obama borrowing money to send to Greece when so many people in this country who have lost long term jobs,lost homes,living on the street, little or no food. I vote to take Obama and his family if they want to go and DROP them on a desert island some where just so...
Arkansas Slim: Update. Oil hit 105 per barrel yesterday, 2 20 12. Gas US Avg => 3.50 per gallon. Cloward Piven Theory of Economics: Tipping point of US Electorate => 51%. Nevada odds for Obama RE Election 6/10 on thier sport boards. EU/Greece set to collapse, dominos arranged. Socialistic...
kkl: America is now turning mediocre no more fun no more trips or vacations 100 bucks to fill gas tank and pasta and ramen noodles for life for usa there is no more hope no more fun just work go home work go home fill up gas tank eat shit and work no more fun thanks for nothing nobama i hope you...
Chris Marshall: Hi Janice, I just wanted to know, how would you be able to get a good investment out of the Whole Life Insurance if it costs really high? The projections usually given out by “Financial Advisors” that 12% is the usual earnings specially if it is invested in TSX or NYX...
Agent: Walt Disney funded Disney World by using the cash value in his whole life policy. You can’t say that was a mistake. Buy term for a specific need/period and buy whole for a permanent need or if you need your life insurance past age 65.
Forex Agent: As a financial advisor what I tell clients is that the main purpose of a life insurance policy is to provide a death benefit. Whether term, some sort of permanent life insurance, or a combination of the two is most appropriate depends on a number of factors including the...
Cindy: Before long they will, if not already, invade and keep track of everything you do including the privacy of your own home exploiting you and demanding that you worship them. You will be powerless to control it so you will have two choices…… ;kiss butt or commit suicide.
Space Cadet: don’t be rediculous. Glass Steagall is a red hearing. This problem is much farther reaching, from before the Nixon Administration. He took the US off the gold standard which was the pillar of the US dollar, and the reason it is the world currancy. He did that because the US...
Hervy: Very good advice, same as I give when talking to people. Clark Howard and Dave Ramsey are both good sources of information that is inline with what is written here at EC. Another good website that i tell people to go to in order to get an easy calculation of how much insurance to buy is...
BenP: This is part of the cannon fodder that will be used against Obama in 2012 and his administration. It’s not that he is horrible (he is) or worse than any other President (about the same), its that examples like these can be used to show the devil you know has got to be worse than the...
Lauren: Personally I think you sound like an idiot. The NIH spent 55,000 to promote a vacine that does not exist and, one of which, they would not fund to discover in the first place(yes, it’s ture look it up). If someone lives in an area with a lot of storms they already understand the...
Matt USA: I know I’m a little late to this discussion, but I think that the economic collapse scenario has changed somewhat in recent weeks. It appears that Europe will go first, followed by the United States who has gambled and lost on a TARP style European bailout. The real question for...
Kim: Marcy, Rep. Alan Grayson said in the attached youtube video in 2010 that Fannie Mae and Freddie Mac both own stock in MERS. How much stock and when did they own it? Would this explain their current actions? Did they move loans out of MERS and into Fannie Mae for the tax payers to bail out?...
China: @Serban Enache , You Are Wrong We are In Lot Of Trouble and you Know This , Starting In 2012 We will have Many Many Different Problems , We The Government Is Paying For All This Building , We Know Our Own Citizens Can’t Afford This Type Of Live Style , but we are building it Any way...
City On a Shining Hill: “The problem with socialism, i.e., the failed economic system being adopted by so many nations in the world today, is that in funding entitlement programs voters want in their politicians and having governments fund retirement, health care, education, etc, is that...
Rider I: How the US has historically used mineral rushes to get it out of Deficits and stop foreign economic take over. In the US’s historical past the Druids have used and impressed upon the US leadership to use mineral resources to stop economic warfare, along with military take over....
Financial Collapse: Everyone needs to get this correct… (REPOST ON TWITTER, FACEBOOK) America is controlled by the 3 privately owned states (district of columbia, the city of london, and the vatican.) Each has it’s own flag, pays no taxes and has it’s own laws. All 3 are part of...
Tm Newman: I graduated with my B.A. in psych/soc a year ago. Interned teaching math and English to fourth and seventh graders. The school shut down due to lack of funding. All the kids got shipped off to public school. I can’t find a position in my field, and there are no teaching jobs in...
hefsmaster: Been a slow couple weeks since the downgrade. News wise that is. But it gave me more time to coin a phrase. You’re a true libertarian when you piss everybody off. Which explains why everybody thinks were nuts and relegated to being a third wheel in politics. Well call me and...
PeacefulPatriot: The worst is yet to come in the realm of austere measures to keep up appearances on the global markets. The truth though is quite obvious to the sane members of society, we have reached a break point and it is the Systemic collapse of the post-industrial globalization bubble. All...
Serban Enache: Pearl Harbos was orchestrated as an operation years before WW2, by the British empire in conjunction with Imperial Japan. The japanese elite didn’t surrender even when they did not have any hope of wining, let alone after Hiroshima, though I don’t agree with the two...
hefsmaster: No, despite these guys obvious failings. He is exactly right. You think japan would have attacked us without any allies. Pearl harbor is an effect from a cause. Without hitler, point is mute. By the way lee, you haven’t copied anything in a while. You a congressman?
Serban Enache: This Larry Summers has some nerve. Is he trying to say that Hitler attacked Pearl Harbor?
Gordon Shumway: Two questions: 1. Why is it a felony for an individual to print money, but evidence of a keen insight into the arcane world of macroeconomics when a bankster does the same thing, only on a vastly greater scale? 2. Since those who are running the Fed and Treasury are supposed to be...
tim: i for one will not pay a single dr bill my sickness is caused by our government let’s take it back already raped and brusied lady liberty is not what she stood for so many years lets scrap the statue that means so little any more freedom is prison in america try being disabled for 20...
tim: well about time someone in power noticed what wool us seniors have to face daily after food shopping go to my drug store same tricks and and cost is up 25 percent then dr co-pays up another 20 % what will we do when money social security doesnt go far enough to keep us healthy
Space Cadet: Does it matter how we got here? The people in charge ‘think’ they are so smart that they will finesse our way out, while staying in power and making a ton of money for their pals. We will be left to pick up the tab and clean up the mess, as usual. My neighbors just got...
