The U.S. economy is in bad shape. Well, I believe that’s an understatement, the U.S. economy is in “deep shit.” Pardon, my French. Let’s start off with the facts here. On December 15, 2005, the U.S. Treasury/OMB Department secretly released its report entitled “Financial Report of the United States Government.” (PDF File) The findings of this report are so huge every news organization should be investigating how the Bush Administration has let this kind of financial disaster happen. David Walker who is the Comptroller of the U.S. stated in his report:
Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.
As this long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008.
Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance.
Dr. Chris Martenson of The End of Money puts it “The $53 trillion shortfall is expressed as a ‘net present value’. That means that in order to make the shortfall disappear we’d have to have that amount of cash in the bank – today – earning interest (the GAO uses 5.7% & 5.8% as the assumed long-term rate of return) And next year we’d have to put even more into this mythical interest bearing account simply because we didn’t collect any interest on money we didn’t put in the bank account this year. For the record, 5.7% on $53 trillion is a bit more than $3 trillion dollars so you can see how the math is working against us here. This means the deficit will swell by at least another $3 trillion plus.” The report also gives a stern warning that “The net social insurance responsibilities scheduled benefits in excess of estimated revenues) indicate that those programs are on an unsustainable fiscal path and difficult choices will be necessary in order to address their large and growing long-term fiscal imbalance…Delay is costly and choices will be more difficult as the retirement of the ‘baby boom’ gets closer to becoming a reality with the first wave of boomers eligible for retirement under Social Security in 2008.”
Dr. Chris Martenson sums it by stating that:
- There is no way to ‘grow out of this problem’. The US financial position has deteriorated by over $22 trillion in only 4 years and $4.5 trillion in the last 12 months.
- Any economic weakness will only exacerbate the problem.
The future will be defined by lowered standards of living.It’s pretty evident that the dollar is already falling and I suspect things are not going to improve much as countries opt to go with the Euro.
