Our recent article, “20 Things You Will Need To Survive When The Economy Collapses And The Next Great Depression Begins“, has drawn some intense criticism from those who believe that the U.S. economy is so strong that it could never completely and totally collapse. In fact, this blog is being accused of officially going off the deep end. Why? It’s not because we are pointing out that the economy is bad. After all, according to a recent Pew Research national poll, 88 percent of Americans rate national economic conditions as only fair or poor. No, rather it is because we are projecting the eventual complete and total collapse of the U.S. economy. There still seems to be a belief among a large number of Americans “that things are never going to get THAT bad”. But they are going to get that bad. It’s just that most people do not realize it yet.
But while times are still good (and what we are experiencing now is rip-roaring prosperity compared to what is coming), large numbers of people are going to continue to live in denial. In fact, those who try to warn people about what is coming are going to be accused of “fear-mongering”. One recent commenter even accused us of totally going off the deep end like many of the Y2K alarmists did….
—-
“Ok – you’ve officially fallen off the deep end. This blog went from legitimate economic concerns to grand fear mongering. This is the same as Y2K all over again. I have friends who still have bunkers and thousands of dollars of expired canned food and you’re suggesting they go do it again…”
—-
First of all, it was completely and totally obvious that Y2K was going to be a non-event to anyone with a bit of common sense. There was simply no way that a “computer glitch” that was foreseeable years ahead of time was going to cause the collapse of society.
What is happening with the U.S. economy now is completely different. We have built an entire economic system on ever-increasing amounts of debt and paper money, and anyone with half a brain should be able to see that such a system is not sustainable in the long-term. The collapse of the economy is inevitable due to the way that it was constructed.
As for having “thousands of dollars of expired canned food”, that would not be a problem if you rotated the food that you have stored. You eat the old stuff first and you replace it with new food that you have purchased.
But the commenter above was not the only one to accuse us of trying to scare people….
—-
“How does the economic collapse lead to a complete halt to all economic activity? More people may be poorer, but they will still have some money to motivate others to produce for a market. The natural disaster scenario seems more plausible for this type of warning. More and more foreclosures don’t. This posting is a bit much for me, seems just some much scaremongering.”
—-
The commenter is right about one thing – a few bad economic statistics are not enough to run out and start preparing for the collapse of society. After all, the American economy has always recovered no matter what happened before. If we made it through the Great Depression, we can make it through this, right?
Well, the truth is that there are some fundamental differences between what is happening now and what happened during the Great Depression.
During the Great Depression, most Americans were not up to their eyeballs in credit card debt, car payments, student loans and mortgage debt.
During the Great Depression, most Americans either owned their land or had a great deal of equity in their land. As we wrote about recently, today that is not the case. Equity as a percentage of home value in the United States has been hitting all-time record lows.
During the Great Depression, most Americans were not dependent on giant corporations to feed and supply us. Back then, the majority of Americans knew how to live off the land and grew at least some of their own food. Today that is most definitely not the case.
During the Great Depression, America still had the greatest manufacturing base in the entire world. Today we have “offshored” our once great manufacturing base, and we have become a fat, spoiled society that consumes everything in sight but manufactures very little.
During the Great Depression, America did not have a colossal trade deficit. Today we have got the biggest trade deficit in the history of the world.
During the Great Depression, the wealth of Americans was not being sucked dry by dozens of different kinds of taxes. Today we are being taxed in so many various ways that many Americans actually end up spending over half their incomes just in taxes.
During the Great Depression, derivatives were not even an issue. Today, we have created a derivatives bubble that is now well beyond a quadrillion dollars.
Just think about that.
Over 1,000,000,000,000,000 dollars.
Counting at one dollar per second, it would take 32 million years to count to one quadrillion.
In fact, renowned investor Warren Buffett has warned that derivatives are “financial weapons of mass destruction” that could bring down the entire world economic system.
And he is right.
When derivatives collapse, there is not enough money in the world to fix the mess that will be created. All of the governments in the world working together would not be able to print money fast enough to even make a dent in the colossal wave of red ink that would be created.
The truth is that the U.S. economy (and the world economy for that matter) is teetering on top of a giant pyramid of debt and paper that is on the verge of coming down like a house of cards.
But if you do not want to believe this blog, perhaps you will listen to some of the top financial experts in the world who are also warning that a complete and total economic collapse is coming.
For example, Gerald Celente, the CEO of Trends Research Institute, is forecasting that we are going to see a devastating economic collapse by the year 2012. It would be easy to dismiss him, except for the fact that he has a sterling track record of forecasts going back 3 decades, and he has appeared on almost all of the major news networks who have no problem relying on him as a source. What Celente says is on the way for America is absolutely bone chilling….
But if you don’t want to listen to Celente, perhaps you will listen to Peter Schiff, the president of Euro Pacific Capital. He accurately predicted the recent financial crisis, and he is also forecasting that a depression is on the way. Schiff is convinced that we need to allow the current “Ponzi economy” to collapse so that something more substantial can arise from the ashes….
Jim Rogers is another financial expert that is forecasting a major economic collapse. Jim Rogers was a co-founder of the Quantum Fund, and is a college professor, author, economic commentator, and creator of the Rogers International Commodities Index. He says that civil unrest is on the way and that now is a good time to take up farming if you want to make it through what is coming….
The truth is that the vast majority of Americans have no idea just how vulnerable the U.S. economic system is. A new Gallup poll has found that 44 percent of Americans believe that they could barely go a month before experiencing severe economic hardship if they lost their jobs.
How long could you go if you suddenly lost your job?
Right now the U.S. economy is being kept afloat by unprecedented U.S. government intervention and spending, but we all know that the U.S. government cannot keep spending money like it is water forever without very serious economic consequences. To give you an idea of how desperate things have become, just check out the following graphic about the U.S. national debt that was featured in the Chicago Tribune….
Anyone who believes that such a tidal wave of red ink is sustainable please raise your hand.
The truth is that the U.S. economy is caught in a death spiral.
Already there are some areas of the United States that are literally dying.
For those who do not believe this fact, the following is a challenge for you….
Head down to Detroit and buy one of those houses that are on sale for less than a thousand dollars (in fact there have even been reports of some houses selling for a single dollar in Detroit), and try to live there for a month.
You will quickly learn what it is like to live in an area that is literally dying economically.
When people are hungry and they can’t get jobs they get desperate.
So far this year in Detroit, car thefts are up 83%, robberies are up 50%, burglaries are up 20% and property destruction is up 42%.
What is happening in Detroit is a preview of what is soon going to happen all over America.
So doubt it all you want, but all the doubting in the world is not going to stop what is coming. The U.S. economy is dying so you better start getting ready.
When you talk to most Americans about taxes, primarily what they think about is the U.S. government and the federal income tax. But while that may be the biggest tax that most Americans pay, the reality is that the truly insidious nature of the tax system in the United States is how it sucks money out of us in dozens of different ways until we don’t even feel it anymore. Instead of having one or two big tax bills, U.S. taxpayers face a “death by a thousand cuts” as tax after tax after tax just keeps coming. Most Americans don’t even realize how many kinds of taxes they pay. Before reading the rest of this article, try to estimate how many different kinds of taxes that Americans pay each year. Five? Ten? Twenty? Well, below we have listed over 50 different kinds of taxes that Americans pay. It is no wonder the Tea Party movement is growing so fast! People are sick and tired of constantly being financially drained by tax after tax. But even as you read this, members of the White House panel charged with reducing the U.S. national debt are considering recommending the adoption of a “European-style” Value Added Tax as a way for the U.S. government to bring in even more money.
Well, the truth is that millions upon millions of Americans are quite sick of being taxed into financial oblivion and they have one giant message for those who want to tax us some more….
“We Are Being Taxed Enough Already!”
Just consider the following list of the various types of taxes that Americans have to pay each and every year…..
Accounts Receivable Tax
Building Permit Tax
Capital Gains Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Court Fines (indirect taxes)
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel permit tax
Gasoline Tax
Gift Tax
Hunting License Tax
Inheritance Tax
Inventory tax IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Local Income Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Payroll Taxes
Property Tax
Real Estate Tax
Recreational Vehicle Tax
Road Toll Booth Taxes
Road Usage Taxes (Truckers)
Sales Taxes
School Tax
Septic Permit Tax
Service Charge Taxes
Social Security Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone federal excise tax
Telephone federal universal service fee tax
Telephone federal, state and local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax
Toll Bridge Taxes
Toll Tunnel Taxes
Traffic Fines (indirect taxation)
Trailer registration tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft registration Tax
Well Permit Tax
Workers Compensation Tax
When you add all the taxes together, a significant percentage of Americans end up paying well over 50 percent of their income in taxes of one form or another.
And the list above does not even include all of the new taxes that are in the new health care law that was just rammed down the throats of the American people.
But if you enjoy being taxed until you are dry then none of this should bother you.
Sadly, according to an official U.S. government report, even with all of this taxation rapidly growing interest costs on the national debt together with spending on major entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every dollar of federal revenue by the year 2019. That is before a penny will be spent on anything else. Because of our reckless financial insanity, the U.S. government is now facing a financial crisis of unprecedented magnitude.
But whatever we end up giving to the federal government just never seems to be enough. It’s voracious appetite for spending just seems to multiply the bigger it gets.
The really tragic thing is that the U.S. federal government is not just spending our money. It is spending the money of our children and our grandchildren and of our great grandchildren.
We are being taxed into oblivion and yet the U.S. government apparently has no shame in stealing increasing amounts of money from future generations year after year after year.
Do you think that the U.S. federal government will one day wake up and decide that we are being taxed enough already?
No.
The truth is that unless we vote out all of the Republicans and all of the Democrats that have been taxing us to death, they will keep right on doing it.
We deserve better and future generations deserve better.
When you watch the mainstream news, how often do you hear them identify the Federal Reserve as the ultimate source of all of our financial problems? Never? Well, there is a good reason. The Federal Reserve was created and continues to benefit the elite international bankers that are raping the United States blind financially. Many of the same financial powers own large interests in the 6 gigantic media companies that dominate U.S. mainstream media. So you won’t hear the truth from them. On this website we go on and on about how bad the U.S. national debt is. And it is really, really, really bad. But rarely do you hear from anyone who we owe all of this money to. Yeah, we owe large amounts to Japan and China and a bunch of other nations, but the biggest holder of our debt by far is the Federal Reserve. Just like the owner of your mortgage or your car loan, they expect to be paid back – with interest.
Now U.S. Federal Reserve Chairman Ben Bernanke is warning that the U.S. national debt could balloon to more than 100% of GDP by the year 2020. For those familiar with national debt statistics, that is a very, very dangerous threshold to cross. Basically the United States is in debt up to its eyeballs and the debt continues to grow at an exponential rate.
The truth is that either alternative will slow down the U.S. economy and will reduce our standard of living, but this is the situation that we have gotten ourselves into.
And we have got to service that gigantic debt that we owe to the Federal Reserve (among others).
In fact, a whole lot of government officials are talking about taxes these days.
And not about lowering them.
Some administration officials are floating the idea of a national sales tax and others are openly discussing adopting a European-style “value-added” tax.
Any way that they can drain more money out of us sounds good to them.
In fact, members of Barack Obama’s “fiscal reform commission” say that higher taxes must be considered as a way to handle the U.S. government’s mounting debt problem.
Of course they could just stop wasting trillions of dollars, but apparently that is too hard.
And so where will all of these new taxes go?
To managing our colossal debt of course.
The truth is that we have locked generations of Americans into debt slavery.
We have piled up the biggest mountain of debt in the history of the world, and our children and grandchildren will spend all of their lives trying to pay interest on it.
Haven’t we left them with such a wonderful legacy?
If you don’t understand who the Federal Reserve is or what they are doing to us, please watch the excellent 4 minute video below. It does a great job of introducing people to the rotten core at the center of the U.S. financial system. We encourage you to send this video out to as many of your friends and family as possible. Perhaps if there is a mass awakening, Americans can elect politicians that will shut down the Fed and will reclaim America’s financial destiny….
There is a silent monster that looms menacingly over U.S. government finances. Every politician knows about it, but very few of them ever want to talk about it. This silent monster grows larger every year, and yet nobody seems to know quite what to do about it. Those who have closely analyzed this monster all seem to agree that one day it will create a financial tsunami of a magnitude that is absolutely unprecedented, but there is vast disagreement about how to escape this financial tsunami or if it is even possible to escape it. The name of this monster is “entitlements” – Social Security, Medicare and other social Ponzi schemes that the U.S. government has locked itself into funding. It would be hard to understate the seriousness of the problem that entitlements present. In fact, according to an official U.S. government report, rapidly growing interest costs on the national debt together with spending on major entitlement programs will absorb approximately 92 cents of every dollar of federal revenue by the year 2019. By 2020, that figure will be up around 100 cents of every dollar of federal revenue. So that means that interest on the debt and spending on entitlement programs will eat up everything the U.S. government takes in before a penny is spent on anything else. That is a recipe for national financial suicide.
And unfortunately, the problem is only going to get far, far worse when you project things out beyond the year 2020. Right now, interest on the debt and spending on entitlement programs like Social Security and Medicare eat up only about 10 percent of GDP. By 2080, they are projected to eat up approximately 50 percent of GDP. In fact, things are even more dire than the chart below indicates. This chart is based on previous government figures that projected that mandatory spending will exceed government revenues at some point between 2030 and 2040, but the latest government figures now project that this will happen right around 2020. So as mind blowing as this chart is, keep in mind that it actually understates the problem we are facing….
This week, there was news that the Social Security system is in much worse shape than previously projected. According to the Congressional Budget Office, this year the Social Security system will pay out more in benefits than it receives in payroll taxes. This was not supposed to happen until at least 2016.
Now it is happening in 2010.
It turns out that the “recession” that we have just been through has hit Social Security revenues really hard.
And unfortunately, as waves of Baby Boomers start retiring, these “Social Security deficits” are going to get even worse.
So where will the money come from to pay the benefits that are owed?
For now, the money will come from the $2.5 trillion Social Security Trust Fund that has been accumulated.
But keep in mind that the $2.5 trillion figure is extremely misleading.
There are not $2.5 trillion dollars sitting around in a bank account somewhere to pay these benefits.
The truth is that the Social Security Trust Fund does not contain any actual assets.
The only assets the Social Security Trust Fund has are IOUs from the U.S. government.
So basically the U.S. government owes the Social Security Trust Fund $2.5 trillion dollars, and now it turns out that the Social Security system is going to start needing that money.
So where will the U.S. government get that money?
Well, they will borrow it of course.
The reality is that the Social Security program is simply not sustainable.
Back in 1950 each retiree’s Social Security benefit was paid for by 16 workers. Today, each retiree’s Social Security benefit is paid for by approximately 3.3 workers. By 2025 it is projected that there will be about two workers for each retiree.
As a society, we simply have not been producing enough new workers to sustain the current system.
Of course the politicians all say the right things to make us think that they are going to do something about this crisis. For example, Barack Obama recently had the following to say about the massive deficits the U.S. government keeps piling up: “It keeps me awake at night, looking at all that red ink”.
But the truth is that neither political party would dare propose a dramatic restructuring of Social Security or Medicare that would significantly reduce benefits.
Why?
Because it would be political suicide.
Say what you want about old people – the truth is that they vote more than the rest of us do.
Anyone who would dare “take away” their Social Security or Medicare would suddenly find hordes of old people voting against them in the next election.
Absent a change in policy, under this scenario, the interest costs on the growing debt together with spending on major entitlement programs could absorb 92 cents of every dollar of federal revenue in 2019.
Keep in mind that this is before anything is spent on defense, health care, education, homeland security, job creation or anything else.
The following chart was pulled right out of the report. These aren’t the projections of some Internet wacko. These projections are in an official U.S. government report. The implications of the chart below are absolutely mind blowing….
Keep in mind that the U.S. government and the U.S. economy are already on the verge of financial oblivion in 2010. So what is going to happen if these projections are anywhere close to accurate?
In addition, the report also admitted that the present value of projected scheduled benefits exceeds earmarked revenues for entitlement programs such as Social Security and Medicare by about $46 trillion over the next 75 years.
$46 trillion!
Either the U.S. government is going to have to radically slash Social Security and Medicare benefits or they will have to come up with tens of trillions of extra dollars from somewhere.
And remember, the $46 trillion figure is just the “present value” of those future payments.
Because of inflation, the “actual value” of those future payments will be far greater.
These programs cannot keep on paying the same level of benefits.
It is financially impossible.
But what are we going to do? Millions upon millions of elderly Americans rely on these programs.
Are we going to reduce payments to a level where they can only afford dog food to eat and a shack to live in?
As a society, we are really between a rock and hard place.
If we continue on the same path, the United States government is going to go bankrupt.
But any politician who tries to cut benefits or raise taxes will likely face the wrath of the voters at the ballot box.
So for now the U.S. government just continues to spend even more money and continues to go into increasing amounts of debt – apparently hoping that somehow everything will just turn out okay.
But things are not going to turn out okay. We are headed for a financial mess of horrifying proportions.
The truth is that it doesn’t matter how much the U.S. government cuts spending in other areas if it does not get entitlement spending and interest on the national debt under control. If those expenditures are not addressed, it is absolutely guaranteed that the U.S. government will be swamped in red ink for many years to come.
But until severe financial pain starts happening, a large percentage of the American people are not going to be motivated to do anything about this problem.
An overwhelming majority of American voters now believe that the United States could experience a total economic collapse. According to the latest Fox News poll, 79 percent of U.S. voters believe “it’s possible the nation’s economy could collapse”, and the poll found that this belief in the fragility of the American economy cuts across the entire political spectrum. The truth is that the American people, at least on some level, know that a day of reckoning is at hand. For decades, America has been enjoying the biggest party in the history of the world, but unfortunately that party was fueled by a gigantic mountain of debt, and now the bills are starting to come due. Unfortunately for those trying to do something about this economic mess, the American people are starting to realize that the U.S. economy is now basically a house of cards, and that could lead to massive financial panic when things really start to fall apart.
Normally when a poll is taken, you can see big differences in the responses based on the party affiliation of those being surveyed. But in this poll everyone seems to agree – the U.S. economy could experience a complete and total collapse.
Not only did the poll find that 84 percent of Republicans believe the U.S. economy could fall apart, 80 percent of Independents did as well, as did 72 percent of Democrats.
Only 18 percent of the respondents to the survey believed that the economy is “so big and strong it could never collapse.”
It is very rare these days when a large majority of the American people will agree on something.
But unfortunately, they are completely and totally correct.
The U.S. economy is in a death spiral.
So how in the world did we get here?
The answer can be summed up in one word.
Debt.
The United States has piled up household, corporate and government debt at a pace that is mind blowing.
Once upon a time, the United States was the wealthiest nation in the history of the world.
But that was not enough for us.
We had to have more.
So we went out and squandered the wealth of this nation but that wasn’t enough either.
So we started spending hundreds of billions and then trillions of dollars that belong to future generations.
All of this to fuel the greatest party the world has ever seen.
And it has been a great party.
But you can turn out the lights because the party is almost over.
It is very easy to blame the U.S. government for getting into so much debt, but they are not the only ones who have been piling up debt at an insane pace.
In fact, millions of individual Americans have been living beyond their means for decades. Just check out the chart below which shows the growth of household debt since the mid-1960s….
Now tens of millions of Americans are massively overextended and are crying to the U.S. government for help. But nobody forced them to get mortgages that they couldn’t afford. Nobody forced them to max out their credit cards. Nobody forced them to fill up their garages with luxury vehicles.
In large part, we did this to ourselves. U.S. credit card debt per household only crossed the $1,000 threshold in the mid-1980s. Now it is over $8,000 per household….
But the corporate world should shoulder plenty of the blame as well. Corporate debt has been exploding at an exponential rate while profits have remained relatively flat. There is no way that this ratio of corporate debt to profits is sustainable….
And of course the biggest culprit of all is the U.S. government. They have piled up the biggest mountain of debt in the history of the world, but are we not at fault for continuing to elect leaders who keep putting us into so much debt? However, there are some signs that the American people are starting to wake up about this. According to the Fox News poll, by a nearly three-to-one margin, voters believe that the national debt (65 percent) is a greater threat to America’s future than terrorism is (23 percent).
So will this change anything when the next elections come around?
We will see.
Meanwhile, the damage has already been done. The U.S. Congress recently approved an increase in the federal government debt cap to 14.3 trillion dollars. In 2010, the United States government is projected to issue almost as much new debt as the rest of the governments of the world combined. Thanks to the horrifyingly bad management of our finances by our nation’s leaders, the legacy that we are leaving to future generations is the biggest mountain of debt that humanity has ever seen….
Unfortunately, instead of learning from the past and trying to reduce debt, the U.S. government just keeps spending money and piling up debt faster and faster.
But if they stop all of this reckless spending the U.S. economy could plunge right into a depression of unprecedented magnitude and pretty much everyone would be voted out of office.
But if they keep on with all of this reckless spending the long-term consequences will be catastrophic beyond anything that any of us can even imagine.
Either way, this thing is going to end really, really badly.
Whether you want to face it or not, there is no economic future for the United States under the current system.
Enjoy things while they are still relatively good, because this is as good as things are going to get. Incredibly hard times are coming and we all need to start getting ready.
The U.S. money supply has been expanding at an absolutely unprecedented rate. So why are we not experiencing rampant inflation? Why is the U.S. dollar not falling through the floor? Well, the truth is that all of this new money has gotten into the U.S. financial system but it is not getting into the hands of U.S. businesses and consumers. In fact, even though the money supply is exploding, U.S. banks have dramatically decreased lending. This has brought us to a very bizarre financial situation as a nation.
What we have seen is the U.S. government shovel massive amounts of cash into the U.S. financial system and then watch as the big banks sit on that cash and refuse to lend it. The biggest banks in the U.S. reduced their collective small business lending balance by another 1 billion dollars in November 2009. That drop was the seventh monthly decline in a row. In fact, in 2009 as a whole U.S. banks posted their sharpest decline in lending since 1942.
So all of this money that the U.S. government pumped into the financial system has been doing American businesses and consumers very little good. That is why we can have a vastly increased money supply (as you can see from the chart below) and very little inflation.
So if the banks are not lending the money to the American people, what are they doing with it? One of the things they are doing with it is buying U.S. government debt. As you can see from the chart below, U.S. banks have cut business lending by approximately 350 billion dollars since early 2009 and they have purchased approximately 300 billion dollars worth of U.S. Treasury securities.
So instead of loaning money to American businesses and consumers who desperately need it, a ton of this new money is being used to pump up yet another bubble. This time the bubble is in U.S. Treasuries. Asia Times recently described how this trillion-dollar carry trade in U.S. government securities works….
Remarkably, the most aggressive buyers of US government debt during the past several months have been global banks domiciled in London and the Cayman Islands. They borrow at 20 basis points (a fifth of a percentage point) and buy Treasury securities paying 1% to 3%, depending on maturity.
This is the famous “carry trade”, by which banks or hedge funds borrow short-term at a very low rate and lend medium- or long-term at a higher rate. This works as long as short-tem rates remain extremely low. The moment that borrowing costs begin to rise, the trillion-dollar carry trade in US government securities will collapse.
So what happens when this bubble collapses?
Nobody knows for sure. But anyone who has dealt with carry trades in the past knows that when carry trades unwind they can do so very, very quickly and the results can be nightmarish.
The truth is that the U.S. financial system is a house of cards that could fall at any time. A lot of economic pain is on the horizon – it is only a matter of when it comes and how bad it is going to get. Trends forecaster Gerald Celente is predicting that it could be as soon as this year….
Will the health care reform bill that the Democrats are trying to figure out a way to ram through Congress end up being the biggest tax increase in U.S. history? Unfortunately, a close reading of the bill leads to the inescapable conclusion that it will be. You see, the crafters of this legislation were smart. They realized that if they included one huge tax increase in the health care bill it would make headlines all over the country, so they chopped up the taxes into a bunch of smaller pieces in order to make them easier to swallow. In fact, one review of the Senate version of the health care bill identified at least 19 tax increases. When you put all of the tax increases together they add up to the biggest tax increase in the history of the United States. Considering the fact that the U.S. economy is already on the verge of economic collapse, the last thing that the American people need is a massive tax increase. But that is exactly what they are about to get.
So let’s take a closer look at some of these taxes….
*In Section 5000(A) of the Senate version of the bill (which can be found here), there is a requirement for all Americans to purchase health insurance. Those who do not obtain health coverage will be hit with an annual tax penalty of $750.
*Barack Obama is trying to sneak a large Medicare tax increase for wealthy Americans into the final version of the health care bill. Under Obama’s proposal, individuals who earn more than $200,000 and couples who earn over $250,000 would pay an additional 2.9% surtax on unearned income from interest, dividends, annuities, royalties and rents. Up until now, employers and employees have each contributed 1.45% of each paycheck to Medicare. But if Obama’s proposal makes it into the final bill, wealthy Americans will see their Medicare taxes absolutely skyrocket.
*In Section 9008 of the Senate version of the health care bill, a $2.3 billion excise tax would be imposed on the pharmaceutical industry. This tax would not be based on income. It would solely be based on market share. So even if a company was losing hundreds of millions of dollars it would still have to pay.
*Section 9009 of the Senate version of the health care bill imposes an “annual fee” on medical device manufacturers and importers. Once again, this $2 billion “excise tax” would be based on market share and not on income.
*Section 9010 of the Senate version of the health care bill would also impose an “annual fee” on health insurance providers. This $6.7 billion tax would also be allocated based on market share.
So how much of these new taxes on health insurance companies, drugmakers and medical device manufacturers do you think will be passed on to consumers?
Anyone want to take a guess?
Just because a particular tax increase is not directed at you does not mean that it won’t take money out of your pocket.
Let’s look at some more (yes, there are more) of the tax increases….
*Section 9001 of the Senate version of the health care bill contains an excise tax on “Cadillac” health plans. In other words, if you have provided your family with the very best in health coverage you get to be taxed extra. This tax is particularly harsh. Section 9001 imposes a 40 percent tax on the portion of insurance premiums exceeding $8,500 a year for individuals and $23,000 a year for family plans. In order to hide the tax, it will be imposed on the health insurance companies who issue the policies. But do you think that they will not pass that cost on to their customers?
So now the American people will be highly penalized for getting really good health care plans.
*Section 9017 of the Senate version of the health care bill imposes an excise tax on elective cosmetic medical procedures. Any voluntary cosmetic procedures will now be subjected to a 5 percent tax. All of those boob jobs are about to get a lot more expensive.
*The House version of the health care bill would impose a 5.4 percent income tax increase on individuals making more than $500,000 and on couples making more than $1 million.
So if you are living the American Dream you are about to pay a lot more for it if the House version of the health care bill gets adopted.
Let’s break this down a little bit.
Currently, the top income tax rate in the United States is 35 percent.
If existing Bush tax cuts expire in 2011 as Barack Obama wants them to, the top tax rate will go back up to 39.6 percent.
But this new “health care tax” would jack things up even higher.
Another 5.4 percent would take the highest tax rate in America to 45 percent. That is before any state, local or property taxes are even paid.
Pretty soon it won’t even be worth it to work hard in America anymore.
But that is not the end of the tax increases.
A PricewaterhouseCoopers’ analysis for America’s Health Insurance Plans found that family health insurance premiums would be approximately $4,000 a year higher if the health care reform bill is passed.
Can you afford to pay over $300 a month more for health insurance for your family?
Are you starting to get the idea?
This health care reform bill will be an absolute financial disaster for America. But considering the fact that the Senate version of the bill is 2409 pages long, hardly anyone will ever take the time to read the whole thing.
And yes, the Democrats are likely to tweak things a little more as they try to figure out how to sneak a final version through, but there is now one thing that seems virtually certain.
This is going to be the biggest tax increase in U.S. history.
Most Americans who closely follow economics understand that all money in the United States comes into existence as debt. Either the Federal Reserve creates it when the U.S. government borrows money, or private banks create it when they use fractional reserve banking to make loans to customers. If lending increases, it is going to create new money and increase the money supply. But if lending declines, it is going to take money out of the system and will decrease the money supply. So why is this important? It is important because without sufficient lending, the U.S. economy will seize up and grind to a standstill. Unfortunately, we have created an economic system that is fueled by credit, and without enough credit businesses can’t expand or hire more workers, individuals can’t buy homes and cars and there will not be any hope that the U.S. economy will function at previous levels.
If you will remember, this is what happened at the beginning of the Great Depression. The big banks severely tightened credit and it created a deflationary depression.
Unfortunately, the same thing is happening again. In 2009 U.S. banks posted their sharpest decline in lending since 1942. In 2010 so far, bank lending in the U.S. has contracted at the fastest rate in recorded history. A “credit freeze” has struck the entire banking industry. One indication of just how bad the credit freeze has gotten is to look at a graph of the M1 Money Multiplier. It is now at the lowest point it has been in decades. Why? Because banks are simply not lending money….
But didn’t Bush and Obama insist that if we got cash into the hands of the bankers that they would lend it out and help all of us “Main Street” folks out?
If this continues, we may very well experience a 1930s-style deflationary depression, at least for a while.
Already we are seeing the effects of tighter credit hitting the economy….
*Federal regulators on Friday shuttered banks in Florida, Illinois, Maryland and Utah, boosting to 26 the number of bank failures in the United States so far in 2010. The closing of numerous banks on Friday is almost becoming a weekly ritual now.
*The FDIC is planning to open a massive satellite office near Chicago that will house up to 500 temporary staffers and contractors to manage receiverships and liquidate assets from what they are expecting will be a gigantic wave of failed Midwest banks over the next few years.
*The U.S. Postal Service, facing a $238 billion budget deficit by 2020, is being urged to consider cutting delivery to as few as three days a week. As money continues to get tighter, we should expect even more government services to be cut. In fact, some local governments around the U.S. are considering bulldozing whole neighborhoods just so they don’t have to spend money on providing those neighborhoods with essential services.
So will the U.S. government come to the rescue?
Well, some would argue that the unprecedented spending by the U.S. government over the past several years is the only reason why the U.S. economy has not already plunged into a full-blown depression.
But of course all of this government debt is only going to make our long-term problems even worse.
The Congressional Budget Office is projecting that Barack Obama’s proposed budget plan would add more than $9.7 trillion to the U.S. national debt over the next decade.
That is not good news.
Especially if the Federal Reserve refuses to keep “monetizing” all of this debt.
During a recent hearing, Federal Reserve Chairman Ben Bernanke warned Congress that the Federal Reserve does not plan to continue to “print money” to help Congress finance the exploding U.S. national debt.
So if the Federal Reserve will not finance this gigantic pile of U.S. debt, who will?
Already China and some other major foreign powers have reduced their holdings of U.S. Treasuries.
So who is going to borrow the trillions upon trillions that the U.S. government is going to have to borrow?
Perhaps the U.S. government will decide to stop spending so much and will start cutting back and will start being more fiscally responsible.
But don’t count on it.
You see, if the U.S. government does not keep borrowing insane amounts of money to pump up the U.S. economy the whole thing could come down like a house of cards.
Of course it is all going to come down like a house of cards eventually anyway.
There are several ways that all of this could play out (deflationary depression, hyperinflationary implosion, societal collapse, etc.), but all of them are bad.
The truth is that an economic collapse is coming whether you or I like it or not. We had all better get ready while we still can.
The 2009 Financial Report Of The U.S. Government has finally been released, and the news is not good. It basically confirms much of what we already know – that the United States government is a complete financial mess. The U.S. government budget deficit for 2009 was a record-setting 1.417 trillion dollars. The total liabilities of the U.S. government rose from 12.178 trillion dollars at the end of 2008 to 14.123 trillion dollars by the end of 2009. At their present rates of growth, the interest on the national debt and spending on entitlement programs will gobble up almost every single dollar of federal revenue by the end of the decade. Throughout the report, the word “unsustainable” is repeatedly used. The authors of the report understand that the U.S. government simply cannot keep spending and borrowing like it has been recently. But if the U.S. government slows down this reckless spending even a little bit it could literally plunge the U.S. economy into a deflationary depression. In fact, even with all of the “bailouts” and “stimulus packages” there are many who would argue that we are already in a depression. In any event, the authors of the report make it clear that the United States government is facing a financial crisis of unprecedented magnitude.
Just consider the following chart below. This chart comes straight out of the 2009 Financial Report Of The U.S. Government, and it shows how explosively federal deficits have grown in recent years….
The reality is that deficits of three or four hundred billion dollars per year were catastrophic enough.
But a deficit of 1.4 trillion?
That is national financial suicide.
In fact, the chart below from the White House Office of Management and Budget shows just how dire the financial position of the U.S. government has become. The government has dramatically increased spending at a time when government revenues are actually falling….
But this was supposed to be a time when the federal government would be running surpluses to prepare for the massive growth in entitlement spending that everyone knew would come when the Baby Boomers retire.
But that is not happening.
Instead we are already running record-setting deficits.
So what is causing these deficits?
Rampant, out of control spending. Just check out this chart of federal net outlays….
What would happen to your own personal finances if your household spending kept increasing like that?
But things are not going to get any better any time soon.
As interest on the national debt piles up and as spending on Social Security and Medicare explodes it will be extremely difficult to control the U.S. federal budget deficit.
The report projects that the rapidly growing interest costs on the national debt together with spending on major entitlement programs will absorb approximately 92 cents of every dollar of federal revenue by 2019.
That is before anything is spent on defense, education, homeland security, job creation or anything else.
In particular, the growth of interest on the national debt promises to absolutely crush U.S. government finances if something is not done. Just consider the following chart pulled right out of the report….
Take a moment and let the implications of that chart sink in.
Are you prepared to saddle future generations with interest payments that gobble up 30 percent of GDP?
But wait, there’s more.
According to the report, the present value of projected scheduled benefits exceeds earmarked revenues for social insurance programs such as Social Security and Medicare by about $46 trillion over the next 75 years.
So either the U.S. government is going to have to radically cut back Social Security and Medicare benefits or they will have to come up with tens of trillions of extra dollars from somewhere.
And remember, the 46 trillion dollar figure is just the “present value” of those future payments.
Because of inflation, the actual value of those future payments will be far, far, far greater.
Well, can’t we just “grow” our way out of these problems?
Hardly.
The truth is that the U.S. economy is caught in an economic death spiral.
Sometimes words just cannot express how bad things have gotten.
Sometimes it takes charts.
The following chart shows changes in our national income since 1950….
This next chart shows changes in our exports of goods and services since about 1930….
Are you starting to get the picture?
America’s economic goose is cooked.
We are drowning in a sea of debt at the same time our once mighty economic machine is sputtering to a stop.
Meanwhile, the financial powers that be are not about to let a good crisis go to waste. Just like during the Great Depression, the sharks are using hard times as an excuse to gobble up the smaller, weaker fish. In fact, there are persistent whispers that the financial elite see this current economic crisis as the perfect opportunity to consolidate the U.S. banking industry.
In any event, it does not look like things are going to get back to “normal” for most of us any time soon.
Lastly, one interesting tidbit in the 2009 Financial Report Of The U.S. Government can be found in footnote 2 on page vii of the report. In that footnote it tells us why the financial results for the Federal Reserve are not included in the report….
The Federal Reserve is an independent organization and not considered a part of the Federal reporting entity. As such, their financial results are not consolidated into the Government’s financial statements.
Our recent article, “20 Things You Will Need To Survive When The Economy Collapses And The Next Great Depression Begins“, has drawn some intense criticism from those who believe that the U.S. economy is so strong that it could never completely and totally collapse. In fact, this blog is being accused of officially going off the deep end. Why? It’s not because we are pointing out that the economy is bad. After all, according to a recent Pew Research national poll, 88 percent of Americans rate national economic conditions as only fair or poor. No, rather it is because we are projecting the eventual complete and total collapse of the U.S. economy. There still seems to be a belief among a large number of Americans “that things are never going to get THAT bad”. But they are going to get that bad. It’s just that most people do not realize it yet.
Taxed Enough Already!
Well, the truth is that millions upon millions of Americans are quite sick of being taxed into financial oblivion and they have one giant message for those who want to tax us some more….
“We Are Being Taxed Enough Already!”
Just consider the following list of the various types of taxes that Americans have to pay each and every year…..
Accounts Receivable Tax
Building Permit Tax
Capital Gains Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Court Fines (indirect taxes)
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel permit tax
Gasoline Tax
Gift Tax
Hunting License Tax
Inheritance Tax
Inventory tax IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Local Income Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Payroll Taxes
Property Tax
Real Estate Tax
Recreational Vehicle Tax
Road Toll Booth Taxes
Road Usage Taxes (Truckers)
Sales Taxes
School Tax
Septic Permit Tax
Service Charge Taxes
Social Security Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone federal excise tax
Telephone federal universal service fee tax
Telephone federal, state and local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax
Toll Bridge Taxes
Toll Tunnel Taxes
Traffic Fines (indirect taxation)
Trailer registration tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft registration Tax
Well Permit Tax
Workers Compensation Tax
When you add all the taxes together, a significant percentage of Americans end up paying well over 50 percent of their income in taxes of one form or another.
And the list above does not even include all of the new taxes that are in the new health care law that was just rammed down the throats of the American people.
When you add up all the taxes in that bill, it amounts to the largest tax increase in the history of the United States.
But if you enjoy being taxed until you are dry then none of this should bother you.
Sadly, according to an official U.S. government report, even with all of this taxation rapidly growing interest costs on the national debt together with spending on major entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every dollar of federal revenue by the year 2019. That is before a penny will be spent on anything else. Because of our reckless financial insanity, the U.S. government is now facing a financial crisis of unprecedented magnitude.
But whatever we end up giving to the federal government just never seems to be enough. It’s voracious appetite for spending just seems to multiply the bigger it gets.
The really tragic thing is that the U.S. federal government is not just spending our money. It is spending the money of our children and our grandchildren and of our great grandchildren.
We are being taxed into oblivion and yet the U.S. government apparently has no shame in stealing increasing amounts of money from future generations year after year after year.
Do you think that the U.S. federal government will one day wake up and decide that we are being taxed enough already?
No.
The truth is that unless we vote out all of the Republicans and all of the Democrats that have been taxing us to death, they will keep right on doing it.
We deserve better and future generations deserve better.