All across America there are cities and towns that were once prosperous and beautiful that are being transformed into absolute hellholes. The scars left by the long-term economic decline of the United States are getting deeper and more gruesome. The tax base in many areas of the nation has been absolutely devastated as millions of jobs have left this country. Hundreds of cities are drowning in debt and are desperately trying to survive. Last year, city government revenues in the United States fell by another 2.3 percent. That was the fifth year in a row that we have seen a decline. Meanwhile, costs associated with health care, pensions and virtually everything else continue to explode. So what are cities doing to make ends meet? Well, one big trend that we are now witnessing is that many U.S. cities have been getting rid of huge numbers of employees. If you can believe it, 72 percent of all U.S. cities are laying workers off this year. Social services and essential infrastructure programs are also being savagely cut back in many areas of the country. The cold, hard truth is that most of our cities are flat broke and things are going to get even worse in the years ahead.
So how do you know if your own city has become a hellhole?
Well, a few potential “red flags” are posted below….
You know that your city has become a hellhole when most of the street lights get repossessed because of unpaid electric bills.
You know that your city has become a hellhole when you have dozens of young people rampaging in the streets that are thirsty for revenge and that are armed with bats, pipes and guns.
You know that your city has become a hellhole when thieves defecate in the back seat after they have broken into your car and taken your things.
You know that your city has become a hellhole when prostitution and drug dealing are two of the only viable businesses that remain in the city.
You know that your city has become a hellhole when the police chief announces that the police department will no longer respond to calls about burglary and identity theft due to very deep budget cuts.
Many of the examples above may seem humorous at first glance, but the truth is that they reveal just how deeply tragic our economic decline really is.
This is one of the reasons why I write about our trade deficit over and over and over. Every single month, tens of billions of dollars more wealth goes out of the United States than enters it. Every single month, we are getting poorer as a nation. Every single month, we lose more jobs and businesses.
Any politician that tells you that he or she can solve our economic problems without fundamentally addressing our horrific trade imbalance is lying to you. That means that there are a whole lot of liars in both political parties.
Quit listening to the politicians and just open up your eyes and look.
So do any of you have any additional signs that a city has become a hellhole to add to the list above? Please feel free to leave a comment with your thoughts below….
Are we on the verge of a massive financial collapse in Europe? Rumors of an imminent default by Greece are flying around all over the place and Greek government officials are openly admitting that they are running out of money. Without more bailout funds it is absolutely certain that Greece will soon default on their debts. But German officials are threatening to hold up more bailout payments until the Greeks “do what they agreed to do”. The attitude in Germany is that the Greeks must now pay the price for going into so much debt. Officials in the Greek government are becoming frustrated because the more austerity measures they implement, the more their economy shrinks. As the economy shrinks, so do tax payments and the budget deficit gets even larger. Meanwhile, hordes of very angry Greek citizens are violently protesting in the streets. If Germany allows Greece to default, that is going to start financial dominoes tumbling around the globe and it is going to be a signal to the financial markets that there is a very real possibility that Portugal, Italy and Spain will be allowed to default as well. Needless to say, all hell would break loose at that point.
So why is Greece so important?
Well, there are two reasons why Greece is so important.
Number one, major banks all over Europe are heavily invested in Greek debt. Since many of those banks are also very highly leveraged, if they are forced to take huge losses on Greek debt it could wipe many of them out.
Secondly, if Greece defaults, it tells the markets that Portugal, Italy and Spain would likely not be rescued either. It would suddenly become much, much more expensive for those countries to borrow money, which would make their already huge debt problems far worse.
If Italy or Spain were to go down, it would wipe out major banks all over the globe.
Financial turmoil in Europe is no longer a problem of small, peripheral economies like Greece. What’s under way right now is a full-scale market run on the much larger economies of Spain and Italy. At this point countries in crisis account for about a third of the euro area’s G.D.P., so the common European currency itself is under existential threat.
Most Americans don’t spend a lot of time thinking about the financial condition of Europe.
But they should.
Right now, the U.S. economy is really struggling to stay out of another recession. If Europe has a financial meltdown, there is no way that the United States is going to be able to avoid another huge economic downturn.
If you think that things are bad now, just wait. After the next major financial crisis what we are going through right now is going to look like a Sunday picnic.
The following are 20 signs of imminent financial collapse in Europe….
#1 The yield on 2 year Greek bonds is now over 60 percent. The yield on 1 year Greek bonds is now over 110 percent. Basically, world financial markets now fully expect that Greece will default.
#2 European bank stocks are getting absolutely killed once again today. We have seen this happen time after time in the last few weeks. What we are now witnessing is a clear trend. Just like back in 2008, major banking stocks are leading the way down the financial toilet.
#3 The German government is now making preparations to bail out major German banks when Greece defaults. Reportedly, the German government is telling banks and financial institutions to be prepared for a 50 percent “haircut” on Greek debt obligations.
#4 With thousands upon thousands of angry citizens protesting in the streets, the Greek government seems hesitant to fully implement the austerity measures that are being required of them. But if Greece does not do what they are being told to do, Germany may withhold further aid. German Finance Minister Wolfgang Schaeuble says that Greece is now “on a knife’s edge“.
#5 Germany is increasingly taking a hard line with Greece, and the Greeks are feeling very pushed around by the Germans at this point. Ambrose Evans-Pritchard made this point very eloquently in a recent article for the Telegraph….
Germany’s EU commissioner Günther Oettinger said Europe should send blue helmets to take control of Greek tax collection and liquidate state assets. They had better be well armed. The headlines in the Greek press have been “Unconditional Capitulation”, and “Terrorization of Greeks”, and even “Fourth Reich”.
#6 Everyone knows that Greece simply cannot last much longer without continued bailouts. John Mauldin explained why this is so in a recent article….
It is elementary school arithmetic. The Greek debt-to-GDP is currently at 140%. It will be close to 180% by year’s end (assuming someone gives them the money). The deficit is north of 15%. They simply cannot afford to make the interest payments. True market (not Eurozone-subsidized) interest rates on Greek short-term debt are close to 100%, as I read the press. Their long-term debt simply cannot be refinanced without Eurozone bailouts.
#7 The austerity measures that have already been implemented are causing the Greek economy to shrink rapidly. Greek Finance Minister Evangelos Venizelos has announced that the Greek government is now projecting that the economy will shrink by 5.3% in 2011.
#8 Greek Deputy Finance Minister Filippos Sachinidis says that Greece only has enough cash to continue operating until next month.
#9 Major banks in the U.S., in Japan and in Europe have a tremendous amount of exposure to Greek debt. If they are forced to take major losses on Greek debt, quite a few major banks that are very highly leveraged could suddenly be in danger of being wiped out.
#10 If Greece goes down, Portugal could very well be next. Ambrose Evans-Pritchard of the Telegraph explains it this way….
Yet to push Greece over the edge risks instant contagion to Portugal, which has higher levels of total debt, and an equally bad current account deficit near 9pc of GDP, and is just as unable to comply with Germany’s austerity dictates in the long run. From there the chain-reaction into EMU’s soft-core would be fast and furious.
#11 The yield on 2 year Portuguese bonds is now over 15 percent. A year ago the yield on those bonds was about 4 percent.
#13 Greece, Portugal, Ireland, Italy and Spain owe the rest of the world about 3 trillion euros combined.
#14 Major banks in the “healthy” areas of Europe could soon see their credit ratings downgraded. For example, there are persistent rumors that Moody’s is about to downgrade the credit ratings of several major French banks.
#15 Most major European banks are leveraged to the hilt and are massively exposed to sovereign debt. Before it fell in 2008, Lehman Brothers was leveraged 31 to 1. Today, major German banks are leveraged 32 to 1, and those banks are currently holding a massive amount of European sovereign debt.
#16 The ECB is not going to be able to buy up debt from troubled eurozone members indefinitely. The European Central Bank is already holding somewhere in the neighborhood of 444 billion euros of debt from the governments of Greece, Italy, Portugal, Ireland and Spain. On Friday, Jurgen Stark of Germany resigned from the European Central Bank in protest over these reckless bond purchases.
“Should the ECB see its assets fall by just 4.23pc in value . . . its entire capital base would be wiped out.”
#18 The recent decision issued by the German Constitutional Court seems to have ruled out the establishment of any “permanent” bailout mechanism for the eurozone. Just consider the following language from the decision….
“No permanent treaty mechanisms shall be established that leads to liability for the decisions of other states, especially if they entail incalculable consequences”
#19 Economist Nouriel Roubini is warning that without “massive stimulus” by the governments of the western world we are going to see a major financial collapse and we will find ourselves plunging into a depression….
“In the short term, we need to do massive stimulus; otherwise, there’s going to be another Great Depression”
#20 German Economy Minister Philipp Roesler is warning that “an orderly default” for Greece is not “off the table“….
”To stabilize the euro, we must not take anything off the table in the short run. That includes, as a worst-case scenario, an orderly default for Greece if the necessary instruments for it are available.”
Right now, Greece is caught in a death spiral. The more austerity measures they implement, the more their economy slows down. The more their economy slows down, the more their tax revenues go down. The more their tax revenues go down, the worse their debt problems become.
Greece could end up leaving the euro, but that would make their economic problems far, far worse and it would be very damaging to the rest of the eurozone as well.
Quite a few politicians in Europe are touting a “United States of Europe” as the ultimate solution to these problems, but right now the citizens of the eurozone are overwhelming against deeper economic integration.
Plus, giving the EU even more power would mean an even greater loss of national sovereignty for the people of Europe.
That would not be a good thing.
So what we are stuck with right now is the status quo. But the current state of affairs cannot last much longer. Germany is getting sick and tired of giving out bailouts and nations such as Greece are getting sick and tired of the austerity measures that are being forced upon them.
At some point, something is going to snap. When that happens, world financial markets are going to respond with a mixture of panic and fear. Credit markets will freeze up because nobody will be able to tell who is stable and who is about to collapse. Dominoes will start to fall and quite a few major financial institutions will be wiped out. Governments around the world will have to figure out who they want to bail out and who they don’t want to bail out.
It will be a giant mess.
For decades, the governments of the western world have been warned that they were getting into way too much debt.
For decades, the major banks and the big financial institutions were warned that they were becoming way too leveraged and were taking far too many risks.
Well, nobody listened.
So now we get to watch a global financial nightmare play out in slow motion.
Grab some popcorn and get ready. It is going to be quite a show.
In the United States today, we are being taxed into oblivion, yet it is being done so stealthily that most Americans don’t even realize what is happening. Most people are fixated on federal income tax rates, but the federal income tax is only one of the dozens of different taxes that each of us pay each year. The politicians have learned that people get really upset when income tax rates are raised, so they have found hundreds of other ways to raise taxes on us. What most taxpayers in the United States today are facing is “death by a thousand cuts”. When you add up all forms of taxation from all levels of government, approximately 40 percent of all the income in the country is taken in as taxes by government. Large numbers of Americans end up paying well over 50 percent of their income in taxes, and many of them don’t even realize that it is happening. We truly are being taxed into oblivion, and yet the politicians just keep coming back for more.
On all levels, government just keeps growing, and all of this government has got to be paid for somehow. Politicians have become masters at finding ways to tax us so that we won’t even feel it. They have an endless hunger to spend more money, and they depend on us to feed that addiction. Today, the combination of federal government spending, state government spending and local government spending now accounts for a larger share of U.S. GDP than at any other time in our history.
Yes, federal income tax rates were significantly higher 30 or 40 years ago. But virtually every other tax you can think of has gone way up since then or did not exist back then.
Federal income taxes definitely still hurt, but the reality is that where we really get hit is in all of the other taxes that we pay. American families pay Social Security taxes, Medicare taxes, state income taxes, sales taxes, property taxes, death taxes, various excise taxes, gasoline taxes, tire taxes, utility taxes, liquor taxes, telephone taxes and cigarette taxes just to name a few. The truth is that there are dozens and dozens of different taxes that most Americans pay each year, and there are a whole bunch of others that get passed on to us through businesses that we deal with.
Speaking of cigarette taxes, there is legislation in Congress right now that would send taxes on tobacco products absolutely skyrocketing yet again.
I don’t smoke and I never will smoke, but I find the attack on smokers by our politicians to be seriously offensive. If smoking is legal, then leave them alone. Don’t tax them into oblivion just because you don’t like what they are doing.
An excerpt from S. 1403 (The IDEA Full Funding Act) is posted below. You will notice that a portion of this legislation even refers to itself as the “Saving Lives by Lowering Tobacco Use Act”. They are openly admitting that they want to make tobacco so expensive that people cannot afford to use it….
SEC. 3. TOBACCO TAX INCREASE AND PARITY.
(a) Short Title- This section may be cited as the ‘Saving Lives by Lowering Tobacco Use Act’.
(b) Increase in Excise Tax on Small Cigars and Cigarettes-
(1) SMALL CIGARS- Section 5701(a)(1) of the Internal Revenue Code of 1986 is amended by striking ‘$50.33’ and inserting ‘$100.50’.
(2) CIGARETTES- Section 5701(b) of such Code is amended–
(A) by striking ‘$50.33’ in paragraph (1) and inserting ‘$100.50’, and
(B) by striking ‘$105.69’ in paragraph (2) and inserting ‘$211.04’.
(c) Tax Parity for Pipe Tobacco and Roll-Your-Own Tobacco-
(1) PIPE TOBACCO- Section 5701(f) of the Internal Revenue Code of 1986 is amended by striking ‘$2.8311 cents’ and inserting ‘$49.55’.
(2) ROLL-YOUR-OWN TOBACCO- Section 5701(g) of such Code is amended by striking ‘$24.78’ and inserting ‘$49.55’.
(d) Clarification of Definition of Small Cigars- Paragraphs (1) and (2) of section 5701(a) of the Internal Revenue Code of 1986 are each amended by striking ‘three pounds per thousand’ and inserting ‘four and one-half pounds per thousand’.
(e) Clarification of Definition of Cigarette- Paragraph (2) of section 5702(b) of the Internal Revenue Code of 1986 is amended by inserting before the final period the following: ‘, which includes any roll for smoking containing tobacco that weighs no more than four and a half pounds per thousand, unless it is wrapped in whole tobacco leaf and does not have a cellulose acetate or other cigarette-style filter’.
(f) Tax Parity for Smokeless Tobacco-
(1) IN GENERAL- Section 5701(e) of the Internal Revenue Code of 1986 is amended–
(A) in paragraph (1), by striking ‘$1.51’ and inserting ‘$26.79’;
(B) in paragraph (2), by striking ‘50.33 cents’ and inserting ‘$10.72’; and
(C) by adding at the end the following:
‘(3) SMOKELESS TOBACCO SOLD IN DISCRETE SINGLE-USE UNITS- On discrete single-use units, $100.50 per each 1,000 single-use units.’.
You can view the full text of this legislation right here. Please notice that some of the tax increases are absolutely mind blowing. For example, the tax rate on pipe tobacco is going from 2.8311 cents to $49.55.
Now that is a tax increase you can really sink your teeth into.
We are seeing “quiet” tax increases like this happen on every level of government all over the United States.
Of course I haven’t even mentioned all of the fines and fees and “registration” charges that state and local governments are hitting us with.
Have you gone to renew your car registration lately? In some states (such as California) the fees have gotten absolutely ridiculous.
Speaking of California, it looks like they are getting ready to target cellphone users once again.
According to USA Today, California is getting ready to seriously jack up the fines for talking on a cellphone while driving….
The state Senate has sent a bill to Gov. Edmund G. Brown Jr. raising the basic fine for a first automotive offense from $20 to $50, the Sacramento Bee reports. For subsequent offenses, the fine would rise from $50 to $100. That’s not the worst of it: by the time state and local assessments are added on, the total for a first offense rises to between $208 to $328. For additional tickets, make that $328 to $528.
Yes, talking on a cellphone while driving is dangerous. But hitting people with tickets of $300, $400 or even $500 is not about safety. It is all about revenue generation.
Right now we are seeing an epidemic of speed traps all over the country. State and local governments are desperate for money, and they see speeders as an easy source of revenue. You can read more about this phenomenon right here.
Speaking of “revenue”, that seems to have become Barack Obama’s new favorite word lately. He seems absolutely obsessed with raising more money for the federal government. The Obamacare law was absolutely packed to the gills with new taxes, but now he wants even more.
Yes, it is true that the wealthy are getting away with murder under our current tax system. I find it highly offensive that many people that make millions of dollars each year are able to find ways to pay much, much smaller percentages of their incomes in taxes than I do.
But raising tax rates isn’t going to solve the problem. Those that are masters at avoiding taxes are going to continue to do so. Meanwhile, middle class Americans and small businesses will continue to get bled to death.
Our current tax system is fundamentally broken and needs to be completely thrown out and replaced.
However, no system is going to work until the federal government gets a handle on its spending addiction.
In the past couple of years, spending by the federal government as a share of GDP has been the highest that it has been since World War II.
You would think that there should be plenty of fat to trim, but as the recent debt ceiling deal clearly demonstrated, our politicians do not intend to significantly reduce government spending.
They are just going to keep borrowing, spending and finding more ways to tax us.
All of this nonsense in Washington D.C. is part of the reason why Americans are so displeased with Congress at this point. According to Gallup, 84 percent of Americans now disapprove of the way Congress is doing its job, which is a brand new all-time high.
The truth is that sending more money to Washington D.C. is not going to “fix” things.
The federal government has multiplied in size over the past several decades, and yet the number of poor people just continues to increase.
Giving the poor more handouts may ease their suffering for a little while, but it is not the solution to their problems. What they really need are good jobs, but our politicians have very busy setting up unfair trade agreements that allow millions of our jobs to be shipped overseas, and they continue to suffocate businesses in this country with mountains of ridiculous regulations.
No, the people that truly benefit when more money flows to the federal government are the fatcats that live and work around Washington D.C.
The past few decades have been a bonanza for government contractors, lobbyists and lawyers in the D.C. area.
According to the Washington Post, those living in the Washington D.C. metropolitan area now have a higher median household income than anyone else in the country….
Washingtonians now enjoy the highest median household income of any metropolitan area in the country, and five of the top 10 jurisdictions in America — Loudoun, Howard and Fairfax counties, and Falls Church and Fairfax City — are here, census data shows.
The signs of that wealth are on display all over, from the string of luxury boutiques such as Gucci and Tory Burch opening at Tysons Galleria to the $15 cocktails served over artisanal ice at the W Hotel in the District to the ever-larger houses rising off River Road in Potomac.
There is a ton of money in the D.C. area. I know. I used to work there. Approximately one third of the GDP of the region comes from spending by the federal government. Even during this recent economic downturn, the Washington D.C. region continues to do really, really well.
So, no, raising taxes is not going to fix what ails us. It would just feed the monster that we have created in Washington.
We are already being taxed into oblivion. Middle class America can’t take much more of this.
We need to change our entire approach to taxation in this country, because right now our tax system is fundamentally unfair and it is not working.
So what do all of you think about our tax system? Please feel free to post a comment with your opinion below….
In the shocking video you are about to watch, Howard Dean declares that it is the job of the government to redistribute our wealth. Not only that, he says it in such a way that indicates that he believes that such a notion should be obvious to anyone with half a brain. Well, while it is true that the United States has become a highly socialized nation, the reality is that this is not what the founding fathers intended. The founders intended for us to live in a land where we would have enough freedom and enough liberty to be able to work hard and enjoy life, liberty and the pursuit of happiness. They did not intend for a gigantic federal government to take huge amounts of money from one group of people and give it to another group of people. In any nation where a large scale redistribution of wealth is happening, the incentive to work goes right out the window. Pretty soon you end up with an entire class of people that have learned how to “make a living” by being a parasite of the government, and that is not good for any economy.
If our founding fathers were alive today, they would be horrified by what we have turned into. In 1816, Thomas Jefferson wrote the following….
“To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it.”
The sad truth is that democracy starts to break down once people start realizing that they can vote themselves money out of the national treasury. In fact, that is a very large part of what politics in America is all about today. Politicians are constantly promising what they are “going to do” for various groups of people.
“When the people find that they can vote themselves money, that will herald the end of the republic.”
Not that our founding fathers were against charity. In fact, they believed in it very much. It is just that they did not believe in repressive taxation by a huge national government and they did not believe in large scale redistributions of wealth.
With all of that in mind, watch this shocking video of Howard Dean declaring that it is the job of the government to redistribute our wealth….
Obviously Howard Dean envisions an “America” that is very different from the one that our founding fathers intended.
But does that mean that all government welfare programs are bad?
Of course not.
In fact, if we were to cut them all off today we would have millions of people starving in the streets.
A very large percentage of Americans today don’t even know how to take care of themselves. If we pulled away all government support all of a sudden there would be chaos and anarchy in the streets.
The sad reality is that we have tens of millions of Americans that are now deeply dependent on the socialist system that we have established.
Unfortunately, this is what socialism does – it turns people into pets of the government. Our society should be teaching people to be self-sufficient, but instead we are teaching people to allow the government to take care of them from the cradle to the grave.
So does that mean that our founding fathers would be in favor of the rampant corporate greed that we are witnessing today?
Of course not.
As I have written about previously, the founding fathers were against all large concentrations of power. During the Boston Tea Party, it was the tea of perhaps the most powerful corporation in the entire world at the time (the East India Trading Company) that our founders dumped into the harbor.
If you study early American history, you soon come to realize that corporations were generally very limited in scope and size for many, many years. The era of the giant corporation is relatively new, and our founding fathers never intended for our society to be dominated by gigantic international corporations.
So when the Democrats argue that we should give more power to the federal government and the Republicans argue that we should give more power to the big corporations they are both wrong.
Our founding fathers did not intend for our federal government to have nearly so much power and they did not intend for big, wealthy corporations to have so much power either.
Fortunately, many Americans today are getting back in touch with those principles. There is a growing dissatisfaction with the size of government, and according to Gallup two-thirds of Americans are now dissatisfied with the size and influence of major corporations in America today.
However, it is one thing to discuss the finer points of political and economic philosophy, but it is another thing altogether to deal with the reality of tens of millions of people that cannot feed themselves.
As I have mentioned many times before, there are over 43 million Americans on food stamps today.
So what are we going to do with all of them?
Allow them to starve?
Almost 53 million Americans receive Social Security payments.
What are we going to do – cut off Social Security and watch millions of elderly and disabled people freeze to death in their own homes?
Of course not.
But we have got to start swinging the pendulum back in the other direction. Right now one out of every six Americans is enrolled in some kind of anti-poverty program run by the federal government.
How many Americans being taken care of by the federal government will be too much?
One out of five?
One out of four?
One out of three?
Eventually the entire system crumbles when there are too few people still willing to work hard.
If you ever get the chance to visit a communist country you should. You will notice that nobody really works very hard. That is because there is no incentive to work hard. Very little real wealth gets produced and everyone suffers for it.
So does that mean the U.S. system works?
Of course not.
What we have in the United States today is not real capitalism. It is more aptly called “corporatism”. The big corporations and the big financial institutions have accumulated an absolutely stunning amount of economic power and over the decades they have gotten the government to tilt all of the rules of the game in their favor.
In America today, it is really hard for the average person to start a successful business. The big, powerful international corporations that dominate our economy are everywhere.
So most Americans today have to rely on working for an employer. Unfortunately, the big employers have started to realize that they can make much larger profits by shipping our jobs overseas. That is really bad news for the U.S. middle class.
Well, can’t we just tax all of these big corporations like crazy and even everything out?
Unfortunately it just does not work that way in today’s global society.
As I have written about previously, the ultra-wealthy and many of the biggest corporations have figured out how to “minimize” their tax burdens. While you and I are being taxed into oblivion, the global elite have figured out how to move their money around to escape taxation as much as possible. In fact, it is estimated that today approximately a third of all the wealth in the world is held in “offshore” tax havens.
Ultra-wealthy individuals and mega-powerful corporations can call just about anywhere “home” in today’s global economy. That is just the way the world works now.
In order to “tax the rich”, you first must get legal jurisdiction over their money.
Our tax system has become entirely unfair and it simply does not work. The whole thing needs to be scrapped.
But as we discuss tax policy, there are tens of millions of Americans that are living in poverty.
So what are we going to do about the growing number of Americans that cannot even feed themselves without government help?
Well, the truth is that what they really need is not more handouts.
If you give people handouts, they will just need more handouts tomorrow.
No, what all of these Americans really need are good jobs.
Unfortunately, there are a whole lot less good jobs in America today than there were ten years ago.
Our politicians have stood by as the giant corporations have moved thousands of facilities over to places such as China and India where they can legally pay people slave labor wages.
Since 2001, over 42,000 U.S. factories have closed down for good, and that number is going to continue to increase unless someone stops it.
But nobody is.
Virtually all of our politicians are just standing off to the side with their hands in their pockets.
Our entire economic system is breaking down. Millions of Americans families are scrambling to find some way to survive. Over the past two years, U.S. consumers have withdrawn $311 billion more from savings and investment accounts than they have put into them.
Other Americans are going very deep into debt because they don’t have any other options. When they finally can’t keep up with all the debt, many of these families are losing their cars and their homes.
We are in the middle of an economic nightmare that is absolutely unprecedented. “Redistributing the wealth” would just be like rearranging the deck chairs on the Titanic at this point. It would not fix a darn thing.
When our politicians promise that a little “change” here or a little “tweak” there will get our economy back to normal they are lying to you and most of them know it.
What we need is a comprehensive overhaul of our entire economy. Basically what we need to do is to go back to the blueprint (the U.S. Constitution) and essentially start over.
But most Americans are not ready for that. Most Americans are still enjoying the tremendous prosperity that the biggest debt binge in the history of the world has purchased for us. Most Americans still do not believe that an economic collapse is really coming.
But a massive economic collapse is coming. This whole thing is going to come crashing down and it is not going to be pretty.
The American people are becoming increasingly angry about the extraordinary amount of power and influence that corporations have in the United States today. A new Gallup poll found that 67 percent of Americans are dissatisfied with the size and influence of major corporations in the United States today. Not only that, the most recent Chicago Booth/Kellogg School Financial Trust Index found that only 26 percent of Americans trust our financial system at this point. The mainstream media is acting as if this is a new phenomenon, but the truth is that a dislike of giant corporations goes all the way back to the founding of this nation. Our founders held a deep distrust for all big concentrations of power, and they intended to set up a nation where no one person or no one institution could become too powerful.
Unfortunately, we have very much strayed from those principles. In the United States today, the federal government completely dominates all other levels of government and mammoth international corporations completely dominate our economy.
If our founding fathers could see what is going on today they would probably roll over in their graves.
The history of the corporation can be traced back to the early part of the 17th century when Queen Elizabeth I established the East India Trading Company.
Our founders were not too fond of the East India Trading Company. In fact, it was their tea that was dumped into the harbor during the original Boston Tea Party.
In his book entitled “Unequal Protection”, Thom Hartman described the great antipathy that our founders had for the East India Trading Company….
“Trade-dominance by the East India Company aroused the greatest passions of America’s Founders – every schoolboy knows how they dumped the Company’s tea into Boston harbour. At the time in Britain virtually all members of parliament were stockholders, a tenth had made their fortunes through the Company, and the Company funded parliamentary elections generously.”
So a disgust for great concentrations of financial power is built into our national DNA.
Many people today think of giant international corporations as being synonymous with “capitalism”, but that is just not the case.
Our founders envisioned a land where free enterprise could flourish in an environment where no institution held too much power.
So this false left/right debate about whether we should give more power to the government or more power to the corporations is largely a bunch of nonsense.
If the founders were around today they would say that we need to take a lot of power away from both of them.
Fortunately, it looks like the American people are starting to think the same thing. Not only are the American people dissatisfied with government, they are also becoming increasingly dissatisfied with big corporations.
As mentioned above, according to Gallup two-thirds of Americans are now dissatisfied with the size and influence of major corporations in America today….
As you can see, the gap between those in favor of the size and influence of major corporations and those not in favor has been significantly widening over the past decade.
That is a good thing.
Not only that, but the latest Chicago Booth/Kellogg School Financial Trust Index shows that Americans have very little trust in the financial system at this point.
*Only 26 percent of Americans trust the nation’s financial system.
*Only 13 percent of Americans trust big corporations.
*Only 16 percent of Americans trust the stock market.
*Only 43 percent of Americans trust the banks.
These numbers are staggering, but they should not be surprising. The American people were not pleased at all when the major banks and big financial institutions were showered with bailouts during the recent financial crisis. A lot of that anger is still simmering.
The recent housing collapse, which is still ongoing, was caused in great part by the behavior of the major banks and big financial institutions, but it is the American people which have suffered the most from it. The following very brief animation from Taiwan demonstrates this very humorously….
The American people are still wondering where their “bailouts” are. Most of the big banks and big corporations seem to be thriving even while the number of Americans slipping into poverty continues to grow.
According to Calculated Risk, approximately 15 million Americans are unemployed, about 9 million Americans are working part-time for “economic reasons” and approximately 4 million American workers have left the labor force since the beginning of the economic downturn.
When you total that all up, you get 28 million Americans that wish they had full-time jobs.
Ouch.
There are other numbers that are very disturbing as well. In the month of November, the number of people on food stamps set another new all-time record: 43.6 million Americans.
So we have tens of millions of Americans that can’t get the jobs that they want and we have tens of millions of Americans that can’t feed themselves without government assistance.
No wonder so many people are angry at the big corporations!
The U.S. government has showered the big corporations and the big banks with bailouts, tax breaks and cheap loans and yet the big corporations and the big banks are not coming through for the American people.
Meanwhile, food prices continue to go up. According to the United Nations food agency, global food prices set another new all-time record during the month of January, and they are expected to continue rising for months to come.
That certainly is not going to ease tensions in the Middle East and elsewhere around the world. When people are not able to pay for the food that they need that tends to make them very, very angry.
For now we are not likely to see food riots in the United States, but as food prices rise all of those food stamp cards are not going to go as far as they used to. Average American families are going to feel more strain at the supermarket. There will be less money available for other things.
A key indicator to watch is the price of oil. The price of oil is one of the key components of the price of food, and if we see the price of oil go up to $120 or $150 a barrel that could mean really bad things for both the U.S. economy and the overall global economy.
If we do see another financial crisis like we did in 2008, is the U.S. government going to rush to bail out the big corporations and the big banks like they did the last time?
As we have seen from the numbers above, that certainly would not sit well with the American people.
All over the Internet, Republican pundits are declaring that extending the Bush tax cuts will save the economy and Democrat pundits are declaring that ending the Bush tax cuts will save the economy. Well, you know what? Nothing will save the U.S. economy. The U.S. government is going to continue to drown in a sea of debt no matter what happens with these tax cuts. State and local governments are also going to continue to drown in a sea of debt. Thousands of factories and millions of jobs are going to continue to be shipped overseas every single year. America is going to continue to transfer tens of billions of dollars of its national wealth to foreign nations every single month. Nothing that the Republicans and Democrats are debating right now is going to do a thing to alter the fundamental problems that the U.S. economy is facing.
Not that I personally do not like tax cuts. I would like my own personal income taxes to be cut down to zero percent please. I will take as many tax cuts as I can personally get.
And it is absolutely undeniable that the federal government is already handed way, way, way more money than it ever should need. Starving the federal monster of cash is a good thing. We need a much, much, much smaller federal government. But the odds of us ever returning to the kind of limited central government envisioned by our Founding Fathers is somewhere between slim and none and slim just left the building.
So aren’t less taxes always good? Well, not necessarily. You see, the federal government is planning to spend much more money in the years ahead. When you combine significant tax cuts with huge increases in spending you get lots more debt.
Extending the Bush tax cuts (and throwing in a few extra ones) will help the U.S. economy in the short-term, but without accompanying brutal spending cuts it will make our long-term debt problems even worse.
But most of our politicians don’t think about the long-term. Most of them just want the economy to turn around in the short-term so that they can get re-elected.
For example, Barack Obama is not completely stupid. He realizes that these tax cuts are probably his best shot at a short-term economic boost. If the economy starts to get back to “normal”, it may be just enough to get him another term in office.
And self-preservation is what most U.S. politicians are most interested in.
Meanwhile, we are heading for a national debt nightmare that threatens to destroy our financial system and plunge us into national bankruptcy.
But if our politicians did attempt to make the brutal spending cuts that would be necessary to balance the budget, most Americans would start screaming bloody murder. The truth is that the American people have become dependent on the government and they like getting their checks, their handouts and their government contracts.
Okay, so what will this deal that Obama has made with the Republicans actually do?
Well, it will extend most of the Bush tax cuts for two years (right up through the 2012 presidential election). The following are some of the details….
*All income levels will continue to be taxed at the lower rates instituted by the original Bush tax cuts. That means that the highest rate will remain at 35 percent.
*Barack Obama claims that extending these tax cuts will save the average American family approximately $3,000 next year.
*The 15 percent rate on capital gains and dividends will be continued.
*As part of the package, Republicans have agreed to a 13 month extension of long-term unemployment benefits.
*One new tax cut included in the deal is a reduction of the Social Security payroll tax by two percentage points for one year. So for a year U.S. workers will be paying just 4.2 percent instead of 6.2 percent. Barack Obama believes that Americans will save $120 billion next year from this tax cut alone. For the average American family, it will mean that they will have approximately an extra $1000 in their wallets.
*The existing $1,000 child tax credit will be extended for the next two years.
*Another tax cut that is new would allow U.S. businesses to immediately expense all business investments in 2011. The Obama administration is claiming that this tax cut would be the biggest “temporary investment incentive” in American history.
*A compromise was reached on the estate tax. There will be an estate tax exemption of 5 million dollars per person and the maximum rate will be 35 percent.
So how much will all of this cost?
Well, all over the Internet the Democrats and the Republicans are arguing over figures.
But what is another $900 billion when we are already caught in a death spiral of government debt?
The IMF was already projecting that federal government debt was going to exceed 100 percent of GDP by 2015.
So how soon will we get there now?
Today, our national debt is more than 13 times larger than it was just 30 years ago….
So can’t we just “grow” our way out of this debt?
Not a chance.
Reducing taxes and increasing government spending will both stimulate the economy in the short-term, but both of them will always cause government debt to go up.
The sad truth, as I have written about previously, is that it is now mathematically impossible to pay off the U.S. government debt.
If you took every dollar out of every single wallet, out of every single mattress and out of every single U.S. bank and sent it to the government you wouldn’t even make that big of a dent in the national debt.
So can’t the U.S. government just go out and create more money and solve the problem?
As long as the Federal Reserve system exists, the U.S. federal government will be trapped inside a perpetual debt machine.
The best we can hope for is to slow the expansion of government debt down to a reasonable level.
But as I explained in a previous article, it is extremely unlikely that the U.S. government will ever have a balanced budget ever again.
The U.S. government currently has to borrow approximately 41 cents of every dollar that it spends. The spending cuts that would be required to slash that much out of the federal budget would be beyond draconian.
Sadly, the truth is that even the really bad official budget deficit figures severely understate the extent of the crisis that we are facing.
If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the annual U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion.
So anyone who thinks that we are just a “tweak” or two from fixing U.S. government finances is living in a world of delusion.
Unfortunately, the years ahead look downright apocalyptic. After analyzing Congressional Budget Office data, Boston University economics professor Laurence J. Kotlikoff concluded that the U.S. government is facing a “fiscal gap” of $202 trillion dollars.
But the American people don’t want to hear this. The American people don’t want to hear that there are serious consequences for running up the biggest debt in the history of the world. The American people just want to be told that there are smart people working on the problem and that they are on the verge of “fixing” it.
But it is all a lie. We can keep trying to “kick the can down the road” for a while longer, but eventually a day of reckoning is going to come and it is going to be painful beyond imagination.
Somehow we have the arrogance to believe that our children and our grandchildren should pay back all of the debt that we have accumulated. What we have done to future generations is beyond criminal.
America has enjoyed the greatest party in the history of the world, but eventually it is going to be time to turn out the lights.
For now, however, the Republicans and the Democrats are busy trying to figure out ways that they can keep the party going for a little while longer.
Perhaps they can just slash taxes all the way to zero and the federal government can just borrow all of the money that it needs. At least that way we wouldn’t be endlessly pouring our own money into the financial black hole called the U.S. government.
Unless the U.S. Congress acts, there is going to be a massive wave of tax increases in 2011. In fact, some are already calling 2011 the year of the tax increase. A whole host of tax cuts that Congress established between 2001 and 2003 are set to expire in January unless Congress chooses to renew them. But with Democrats firmly in control of both houses that appears to be extremely unlikely. These tax increases are going to affect every single American (at least those who actually pay taxes). But this will be just the first wave of tax increases. Another huge slate of tax increases passed in the health care reform law is scheduled to go into effect by 2019. So Americans that are already infuriated by our tax system are only going to become more frustrated in the years ahead. The reality is that the U.S. government will soon be digging much deeper into our wallets.
The following are some of the tax increases that are scheduled to go into effect in 2011….
1 – The lowest bracket for the personal income tax is going to increase from 10 percent to 15 percent.
2 – The next lowest bracket for the personal income tax is going to increase from 25 percent to 28 percent.
3 – The 28 percent tax bracket is going to increase to 31 percent.
4 – The 33 percent tax bracket is going to increase to 36 percent.
5 – The 35 percent tax bracket is going to increase to 39.6 percent.
6 – In 2011, the death tax is scheduled to return. So instead of paying zero percent, estates of $1 million or more are going to be taxed at a rate of 55 percent.
7 – The capital gains tax is going to increase from 15 percent to 20 percent.
8 – The tax on dividends is going to increase from 15 percent to 39.6 percent.
9 – The “marriage penalty” is also scheduled to be reinstated in 2011.
It is being estimated that the total cost of these tax increases to U.S. taxpayers will be $2.6 trillion through the year 2020.
Ouch!
But wait, there are even more tax increases coming.
Of course there are a whole host of reasons why the American people are upset with Congress, but one of the big ones is the fact that we are literally being taxed to death.
However, it is not just federal income taxes that are killing us.
In a previous article entitled “Taxed Enough Already!”, we listed just a few of the taxes that Americans have to pay each 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
Are you dizzy yet?
The reality is that the American people are being drained in dozens and dozens of different ways.
Did you think that we could run deficits equivalent to about 10 percent of GDP without ever seeing tax increases?
The truth is that the U.S. government needs a whole lot more money than even these new tax increases will bring in.
After all, it is being projected that the U.S. government will be spending $2 trillion on the interest on the national debt alone by the year 2020.
To put that in perspective, the entire budget for the U.S. government is less than $4 trillion for 2010.
Are you starting to get the picture?
In the years ahead the IRS is going to be digging deeper and deeper into our pockets and a gigantic chunk of that money is going to go directly into the pockets of those who own our debt.
But very few Americans wanted to listen when this problem was actually somewhat fixable 20 or 30 years ago.
So now we are all going to pay the price – literally.
Are we on the verge of a massive financial collapse in Europe? Rumors of an imminent default by Greece are flying around all over the place and Greek government officials are openly admitting that they are running out of money. Without more bailout funds it is absolutely certain that Greece will soon default on their debts. But German officials are threatening to hold up more bailout payments until the Greeks “do what they agreed to do”. The attitude in Germany is that the Greeks must now pay the price for going into so much debt. Officials in the Greek government are becoming frustrated because the more austerity measures they implement, the more their economy shrinks. As the economy shrinks, so do tax payments and the budget deficit gets even larger. Meanwhile, hordes of very angry Greek citizens are violently protesting in the streets. If Germany allows Greece to default, that is going to start financial dominoes tumbling around the globe and it is going to be a signal to the financial markets that there is a very real possibility that Portugal, Italy and Spain will be allowed to default as well. Needless to say, all hell would break loose at that point.
You Know That Your City Has Become A Hellhole When….
So how do you know if your own city has become a hellhole?
Well, a few potential “red flags” are posted below….
You know that your city has become a hellhole when most of the street lights get repossessed because of unpaid electric bills.
You know that your city has become a hellhole when it announces that it will no longer prosecute domestic violence cases in order to save money.
You know that your city has become a hellhole when it simply stops sending out pension checks to retired workers.
You know that your city has become a hellhole when it rips up asphalt roads and replaces them with gravel because gravel is cheaper to maintain.
You know that your city has become a hellhole when it eliminates the entire public bus system.
You know that your city has become a hellhole when nearly half of all the people living there can’t read.
You know that your city has become a hellhole when one out of every ten homes sells for under $10,000.
You know that your city has become a hellhole when you can literally buy a house for one dollar.
You know that your city has become a hellhole when you have hundreds of people living in the tunnels underneath your streets.
You know that your city has become a hellhole when three of your past five mayors have been sent to prison for corruption.
You know that your city has become a hellhole when nearly half of the public schools in the city get shut down because of a lack of money.
You know that your city has become a hellhole when you have dozens of young people rampaging in the streets that are thirsty for revenge and that are armed with bats, pipes and guns.
You know that your city has become a hellhole when it is considered to be one of the 10 most dangerous cities in the world.
You know that your city has become a hellhole when thieves defecate in the back seat after they have broken into your car and taken your things.
You know that your city has become a hellhole when prostitution and drug dealing are two of the only viable businesses that remain in the city.
You know that your city has become a hellhole when the police chief announces that the police department will no longer respond to calls about burglary and identity theft due to very deep budget cuts.
Many of the examples above may seem humorous at first glance, but the truth is that they reveal just how deeply tragic our economic decline really is.
This is one of the reasons why I write about our trade deficit over and over and over. Every single month, tens of billions of dollars more wealth goes out of the United States than enters it. Every single month, we are getting poorer as a nation. Every single month, we lose more jobs and businesses.
Any politician that tells you that he or she can solve our economic problems without fundamentally addressing our horrific trade imbalance is lying to you. That means that there are a whole lot of liars in both political parties.
If the number of good jobs continues to decline, the plight of the average American family is going to continue to get worse. Home sales will continue to hover around record lows. The American people will continue to become increasingly frustrated with the economy.
The signs of decline are all around us.
Quit listening to the politicians and just open up your eyes and look.
So do any of you have any additional signs that a city has become a hellhole to add to the list above? Please feel free to leave a comment with your thoughts below….