Friday, December 09, 2005

I offer up some sobering Doom & Gloom this Friday morning…

Below you’ll find a few excerpts from a research paper by The Heritage Foundation on the looming budget crisis. If the future turns out to be only half as bad as what’s predicted, then we’re in big, big trouble.

At some point within the next decade, the nation will be forced to temper its demand for more government-funded entitlement programs to bolster Medicare, Medicaid, Social Security, etc., and will be confronted with stark choices over which programs to cut and which ones to save just to stay afloat. The sandbar we’ve stuck our collective heads into so long ago is eroding quickly.
...Because of the cost of fully funding Social Security, Medicare, and Medicaid, leading long-term budget projections have calculated that federal spending will increase from the current 20 percent of gross domestic product (GDP) to a peacetime high of nearly 33 percent of GDP by 2050.

Yet even that may be a severe underestimate. These projections assume slower entitlement growth than estimated by the Social Security and Medicare trustees as well as substantial reductions in defense and other spending. Most critically, they assume that the resulting unprecedented increase in the national debt will not affect interest rates. More realistic assumptions show that Social Security, Medicare, and Medicaid costs will leap from 8.4 percent of GDP to 18.9 percent of GDP by 2050.

Unless lawmakers reform these programs, they will have to fund their costs by:

1. Raising taxes every year until federal taxes are 57 percent ($11,000 per household, adjusted into today’s economy) above the current levels;

2. Eventually eliminating every other federal program, including spending on defense, education, anti-poverty programs, and veterans benefits, by 2045; or

3. Running massive budget deficits (the status quo option). This is the most expensive option because it would cause the federal debt to increase from the current level of 40 percent of GDP to 500 percent of GDP. Beginning in 2025, just a small interest rate response would push federal spending to 44 percent of GDP by 2040 and 73 percent by 2050—levels twice as high as previous projections.

Those who consider these scenarios overly pessimistic should examine the Western European economies that are already sinking under the weight of their enormous social insurance systems. With birth rates that are not even sufficient to replace their current population, many “old Europe” nations have been forced to impose steep tax increases on their remaining workers to fund these bloated benefit systems...

...Compared to the United States, per capita income is 30 percent lower in the EU-15, economic growth rates are 34 percent lower, unemployment is substantially higher, and living standards match only America’s poorest states...As their populations continue to age, the economies of countries such as Germany and France risk collapsing under the weight of their unrealistically generous retirement and welfare systems. These European crises provide a glimpse into America’s future if government spending continues to increase steeply.

14 Comments:

At 12/09/2005 6:19 PM, Anonymous Anonymous said...

How about a few other remedies?
1. Stop getting into unwinnable wars
2. Stop all the pork barrels
3. Tax the rich more, they are getting off too easily.
4. Deport all the Canadians

 
At 12/09/2005 6:25 PM, Anonymous Anonymous said...

5. I forgot to include as a remedy for the balloning debt, GET RID OF BUSH!!
Last Comment: Say what you want about Canada, at least they have a surplus in their yearly budgets and with that, the liberals and conservatives can buy the votes with the peoples' own money.

 
At 12/09/2005 6:42 PM, Blogger Ace said...

1) The war is winnable. Stop listening to Howard Dean and the CBC,

2) Though a grotesque waste, the sum total of pork barrel spending pales in comparison to the gigantic payouts from the major entitlement programs,

3) "The rich" (however you define them) pay a huge percentage of taxes as it is. An analysis of federal returns shows that the Top 10% of tax filers pays nearly 66% of all taxes. The top half of taxpayers pays 96.5% of all taxes, the bottom half only 3.5%. Besides, a survey of fiscal policies centered around tax cutting since 1960 shows that taxing "the rich" is often counterproductive, leading to reduced capital incentives and economic stagnation,

4) By and large, Canadians are not a drain on the US economy. In fact, they are a huge boon to it. You would be hard-pressed to make a compelling case to deport any immigrant community en masse to save money.

 
At 12/09/2005 6:50 PM, Blogger Ace said...

5) You will find that your vaunted fiscal surplus will turn into a deficit more quickly than you think. The pace of Canada's social spending commitments is about 10 years ahead of the US, which means the dire scenarios painted by The Heritage Foundation are looming towards you much more rapidly. The most politically expedient response to Canada's coming fiscal crisis, especially considering the prospect of fragile minority governments for the foreseeable future, will be to forgo the surplus and rack up the debt once again. Trudeau's corpse must be smiling.

 
At 12/12/2005 11:04 AM, Blogger Eddie said...

Where did the moon bat come from? I completely agree, ACE. Social programs and tax increases reduce incentives to work, save and invest. These are the three behavioral problems that liberals always fail to address, and deny reality.

 
At 12/12/2005 12:01 PM, Anonymous Anonymous said...

Moon Bat!!! Listen here, you two would not recognize a facetious tongue-in-cheek comment if it jumped up and bit you on your arses.

 
At 12/12/2005 3:15 PM, Blogger Ace said...

Fair enough. Where did I misplace my sense of humor?

(Should I have added a 'u' to that word, anon?)

 
At 12/13/2005 9:32 AM, Anonymous Anonymous said...

You should only drop the "u" when you become a certified Mercan citizen. However the Hotmail spell check will say you mispell it. By the way, why is it that it would help to be half drunk to make out the word verification thing.

 
At 12/13/2005 12:36 PM, Anonymous Fred said...

Unwinnable wars?
Lets see, over 500 incidents including sabotage, bombings, killings in the span of six months after the war was over. Almost three years to defeat the resistance. Ten years to establish a democratically elected government. Yes, this was Germany in the aftermath of WWII. Any war is unwinnable for defeatist.

 
At 12/16/2005 8:09 AM, Anonymous Anonymous said...

Yeah, well this war is unwinnable the way your brilliant(being facetious here) defense minister has handled it. But I guess later Bush will just say "Mission Accomplished Again", declare victory, pull out. That tactic sure worked good in Vietnam. Your example of Germany is a poor comparison considering the forces arrayed against it, a better example would be Vietnam where a half million American troops only delayed the end result. Oh wait, that would tip the arguement in my favour. I will gladly eat my words if the elections in Iraq lead to a stable non-crazed government (like Vietnam).

 
At 12/16/2005 9:28 AM, Blogger Eddie said...

Hey anon,

No point in trying to persuade us. We are too educated and informed to be brainwashed. Peace Out.

 
At 12/16/2005 1:06 PM, Anonymous Anonymous said...

You guys are Bush Republicans. Need I say more? Well probably. Come on, you have to admit he is almost the worse choice for a president ever elected. Other than that other Republican, the "I am not a crook" Nixon. At least Nixon was smart. But what you say is correct, political arguements, as enjoyable as they can be, no matter how crazed or educated a Bush Republican, it is just not possible to change the mind of a pickle. So let's stop beating this dead horse and let me have the last word here. Eh??

 
At 12/16/2005 3:06 PM, Blogger Eddie said...

Get a life, seriously.

 
At 12/19/2005 10:39 PM, Blogger Ace said...

I'm giving the last word to Prof. Thomas Sowell: "Utter ignorance of history enables any war with any casualties to be depicted in the media as an unmitigated disaster."

 

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