Social Security

25 Bitter And Painful Facts About The Coming Baby Boomer Retirement Crisis That Will Blow Your Mind

For decades we were warned that when the Baby Boomers started to retire that this country would be facing a retirement crisis of unprecedented magnitude.  Well, that day has arrived ladies and gentlemen.  Back on January 1st, the Baby Boomers began to retire and more than 10,000 of them will be retiring every single day for years to come.  Most of them have not saved up nearly enough money for retirement.  At the same time, private sector pension plans are failing all over the place, hundreds of state and local government pension plans from coast to coast are woefully underfunded, and the Social Security system is on the road to complete and total disaster.  A massive wave of humanity is hitting retirement age at a moment in history when the U.S. economy is coming apart at the seams.  We do not have the resources to keep the promises that we made to the Baby Boomers, and most of them have not made adequate preparations for retirement.  What we have is a gigantic mess on our hands, and millions of Baby Boomers are going to find retirement to be very bitter and very painful.

A lot of younger Americans just assume that Social Security is enough to take care of the needs of elderly Americans.  But that is just not the case.

Have you ever tried to live solely on a Social Security check?

It is not easy.  The truth is that those checks are just not that large.

The following comes directly from the Social Security Administration….

The average monthly Social Security benefit for a retired worker was about $1,177 at the beginning of 2011.

Could you live on less than 300 dollars a week?

And keep in mind that the $1,177 monthly figure is just an average.  Many receive a lot less than that.

In addition, Social Security benefits have been seriously squeezed by inflation in recent years.  The cost of food and other basics has risen briskly and Social Security benefits have not.

Today, many elderly Americans have to make a choice between buying food, heating their homes or buying medicine that they need.  They simply do not have enough money to do all of them.

It would have been nice if all of the Baby Boomers had been busy saving money for retirement all these years, but that just did not happen.  In fact, the Baby Boomers as a group are trillions of dollars short of what they need for retirement.

So why doesn’t the U.S. government step in to help them out?

Well, the reality of the situation is that the U.S. government is flat broke.  The federal government is now over 15 trillion dollars in debt.  During the Obama administration so far, the U.S. government has accumulated more new debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

Lawmakers are already looking at ways to make the Social Security program less costly.  No, the federal government is not going to be riding to the rescue.

In fact, it will be a minor miracle if the Social Security program is able to survive until the end of this decade, and it will be a major miracle if the Social Security program is able to survive until 2030.

As for myself, I do not believe that I will ever see a single penny from Social Security, and many other working age Americans feel the same way.

Retirement is supposed to be a fun time, but sadly most Americans that are approaching retirement age are not going to have any “golden years” to look forward to.

Rather, millions of elderly Americans are going to find the years ahead absolutely agonizing as they struggle just to survive.

The following are 25 bitter and painful facts about the coming Baby Boomer retirement crisis that will blow your mind….

#1 According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.

#2 According to a recent poll conducted by Americans for Secure Retirement, 88 percent of all Americans are worried about “maintaining a comfortable standard of living in retirement”.  Last year, that figure was at 73 percent.

#3 A study conducted by Boston College’s Center for Retirement Research has found that American workers are $6.6 trillion short of what they need to retire comfortably.

#4 Today, one out of every six elderly Americans lives below the federal poverty line.

#5 On January 1st, 2011 the very first Baby Boomers started to retire.  For almost the next 20 years, more than 10,000 Baby Boomers will be retiring every single day.

#6 At the moment, only about 13 percent of all Americans are 65 years of age or older.  By 2030, that number will soar to 18 percent.

#7 Right now, there are somewhere around 40 million senior citizens.  By 2050 that number is projected to increase to 89 million.

#8 Back in 1991, half of all American workers planned to retire before they reached the age of 65.  Today, that number has declined to 23 percent.

#9 According to one recent survey, 74 percent of American workers expect to continue working once they are “retired”.

#10 According to a recent AARP survey of Baby Boomers, 40 percent of them plan to work “until they drop”.

#11 A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

#12 A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.

#13 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

#14 What is causing most of these bankruptcies among the elderly?  The number one cause is medical bills.  According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

#15 Public retirement funds all over the United States are woefully underfunded.  For example, it has been reported that the $33.7 billion Illinois Teachers Retirement System is 61% underfunded and is on the verge of complete collapse.

#16 Most U.S. states have huge pension obligations which threaten to bankrupt them.  For example, pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.  When you break that down, it comes to $22,000 for every single working adult in the state of California.

#17 Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management have calculated the combined pension liability for all 50 U.S. states.  What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds.  That is a difference of 3.2 trillion dollars.  So where in the world is all of that extra money going to come from?

#18 According to the Congressional Budget Office, the Social Security system paid out more in benefits than it received in payroll taxes in 2010.  That was not supposed to happen until at least 2016.  Sadly, in the years ahead these “Social Security deficits” are scheduled to become absolutely nightmarish as hordes of Baby Boomers retire.

#19 In 1950, each retiree’s Social Security benefit was paid for by 16 U.S. workers.  According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.

#20 The U.S. government now says that the Medicare trust fund will run out five years faster than they were projecting just last year.

#21 The total cost of just three federal government programs – the Department of Defense, Social Security and Medicare – exceeded the total amount of taxes brought in during fiscal 2010 by 10 billion dollars.  In the years ahead expenses related to Social Security and Medicare are projected to skyrocket dramatically.

#22 The Pension Benefit Guaranty Corporation is the agency of the federal government that pays monthly retirement benefits to hundreds of thousands of retirees that were covered under defined benefit pension plans that failed.  The retirement crisis has barely even begun and the PBGC is already dead broke.  The PBGC says that it ran a deficit of $26 billion during the fiscal year that just ended and that it will probably need a huge bailout from the federal government.

#23 According to a survey by careerbuilder.com, 36 percent of all Americans say that they don’t contribute anything at all to retirement savings.

#24 More than 30 percent of all investors in the United States that are currently in their sixties have more than 80 percent of their 401k plans invested in equities.  So what is going to happen to them if the stock market crashes?

#25 A survey taken earlier this year found that 20 percent of all U.S. workers admitted that they had postponed their planned retirement age at least once during the last 12 months.  Back in 2008, that number was only at 14 percent.

Our politicians should have addressed the retirement crisis decades ago before we got to the point of being in debt up to our eyeballs.

It is being projected that the U.S. national debt will hit 344% of GDP by the year 2050, and the Congressional Budget Office says that U.S. government debt held by the public will reach a staggering 716% of GDP by the year 2080.

Obviously those figures will never be reached because our financial system would totally collapse long before then.

So what do we do?

We have tens of millions of elderly Americans that are completely and totally dependent on Social Security and Medicare, but those programs also threaten to bankrupt us as a nation.

Anyone that believes that there is a “quick fix” to these issues is being naive.

The “supercommittee” was supposed to address this problem, but they failed so spectacularly that they have become a national joke.

Sadly, most of our politicians just keep kicking the can down the road.  They hope that somehow things will just magically “work out”.

Well, the truth is that things are not going to “work out”.  The poverty level among the elderly is going to continue to increase.  Pension plans all over this nation are going to continue to fail in staggering numbers.  Social Security and Medicare are going to bleed more red ink with each passing year.

Something should have been done about this problem a long, long time ago.

But it wasn’t.

This crisis was ignored, dealing with it was put off time after time and all the doomsayers were laughed at.

Now the crisis is here, and we are all going to pay the price.

Barack Obama’s Budget For 2012: A Complete And Total Joke

Is Barack Obama trying to play a joke on all of us?  The budget that the Obama administration has submitted for fiscal 2012 is so out of touch with reality that it may as well be a budget for “Narnia”, “Fantasy Island”, “Atlantis” or some other mythical land.  You can view the hard numbers for Barack Obama’s 2012 budget right here.  Obama’s budget assumes that the U.S. will experience economic growth of over 5 percent for most of the coming decade.  That is so far-fetched that “optimistic” is not the right word for it.  It also assumes that U.S. government income (primarily made up of taxes on all of us) will more than double over the next ten years.  For 2011, the budget projects that the U.S. government will take in a total of 2.1 trillion dollars, and for 2021 the budget projects that the U.S. government will take in a total of 4.9 trillion dollars.  For the Obama administration to assume that the federal government will be able to drain an extra 2.8 trillion dollars per year out of the American people by the year 2021 is ridicul0us beyond belief.  In his new budget Barack Obama does propose some very, very modest spending cuts that he knows have no chance of getting through Congress.  Barack Obama’s budget for 2012 also does not even attempt to make any cuts to entitlement programs such as Social Security and Medicare.  In essence, you can sum up Barack Obama’s budget proposal for 2012 by saying that it is a complete and total joke.  This budget is so delusional and so out of touch with reality that it is hard to imagine anyone taking it seriously.

Oh, but Obama is really trying to sell it hard.  When Obama unveiled this new  $3.7 trillion budget for 2012 at a middle school in Baltimore, he insisted that his plan will make it “so that every American is equipped to compete with any worker anywhere in the world.”

Well, that is a nice sound bite, but as I have written about previously, unless Barack Obama suddenly finds a way to stop multinational corporations from paying slave labor wages to their workers on the other side of the globe the job losses in America are going to continue.

But that is a topic for another day.  Getting back to the 2012 budget, Obama is proposing to cut more than a trillion dollars from federal budget deficits over the next ten years.

That sounds really good until you figure out that means that the cuts only amount to about $100 billion a year.  Considering the fact that Obama’s budget is projecting that we will have a $1.6 trillion budget deficit this year alone, that really is not a whole heck of a lot to be cutting.

The truth is that Barack Obama should be proposing spending cuts that are at least ten times as large if he was actually serious about addressing our budget woes.

But at least Obama is not proposing an increase in spending.

Oh wait, he actually is.

In fact, under Obama’s budget, U.S. government spending will soar from 3.8 trillion dollars this year to 5.6 trillion dollars in 2021.

But the mainstream media is solely focusing on the budget cuts that Obama is proposing.

Apparently they are trying to cast him as some sort of “fiscal conservative”.

Try not to laugh.

But the modest cuts that Obama is proposing are at least some place to start.

Under Obama’s budget, approximately half of all government agencies will have their funding decreased from 2010 levels.

In fact, approximately 33 billion dollars would be saved by scaling back or shutting down 200 federal programs.

Of course Obama’s fellow Democrats in Congress will never go along with many of these cuts, but at least it is something.

However, this is where most in the mainstream media stop their analysis.

They don’t take a closer look at the numbers in Obama’s budget.

They don’t question the wacky economic growth assumptions.

They don’t question the bizarre government income projections.

But even with the Obama administration’s crooked numbers, the federal deficit still never drops below 600 billion dollars over the next decade and a total of 7.2 trillion dollars is still added to the national debt over the next decade.

If economic growth ends up being much lower, or if the U.S. government is not able to get twice as much money out of the American people by the end of the decade then the projections would look much, much different.

So where does the Obama administration assume all of that extra money for the government is going to come from?

Oh, from raising taxes of course.

The Obama budget assumes that there will be significant tax increases starting in the year 2013.

A recent article on CNBC summarized some of the tax increases that the Obama budget calls for….

The plan unveiled Monday includes tax increases for oil, gas and coal producers, investment managers and U.S.-based multinational corporations. The plan would allow Bush-era tax cuts to expire at the end of 2012 for individuals making more than $200,000 and married couples making more than $250,000.

Wealthy taxpayers would have their itemized deductions limited, including deductions for mortgage interest, charitable contributions and state and local taxes.

There are many liberals (such as my friend Gary) that would love to see these tax increases go into effect, but Obama knows that there is no chance that they will ever see the light of day unless the Democrats retake the House of Representatives.

But most of Obama’s budget for 2012 is based on things that simply never even have a chance of happening.

The reality is that Obama’s budget for 2012 is a great work of fiction.

Meanwhile, the U.S. government continues to accumulate staggering amounts of debt.

In fact, Obama’s budget admits that we will witness the biggest one year debt increase in history this year.

In 2011, the gross federal debt with surpass 15 trillion dollars.  In fact, it is being projected by some analysts that this will be the year when the debt finally becomes larger than the size of the entire U.S. economy.

Ouch.

But Obama insists that he is taking this debt problem very seriously.

Obama insists that he is committed to making “deep” cuts.

In fact, as he announced this new budget Obama stated that these budget cuts hit “many programs whose mission I care deeply about, but meeting our fiscal targets while investing in our future demands no less.”

Do any of you actually believe him?

Not that the Obama administration is in an easy position.  The truth is that the U.S. government (both Republicans and Democrats) have been horribly irresponsible with our money for decades.

The 14 trillion dollar national debt problem that we have now did not develop overnight.

Neither will it be solved overnight.

But Obama is not even trying to address the tough issues such as Social Security and Medicare.

The truth is that the federal debt problem cannot be solved without addressing our out of control entitlement programs.

So why didn’t Obama address them in his budget?

Well, the reality is that Obama is not stupid.  Social Security and Medicare are political sacred cows.  Obama is not going to do anything at this point that would cost him millions of votes in 2012.

So Barack Obama ignored most of the $4 trillion in budget cuts recommended by the White House-appointed deficit commission.

It kind of makes you wonder why Obama ever appointed a “deficit commission” in the first place.

One area that Obama does attempt to cut in his new budget is military spending.  Obama’s budget for 2012 sets military spending at 5 percent below what the Pentagon requested for 2011.

In fact, Obama’s defense budget would slash military spending by $78 billion over the next five years.

His budget also assumes that we are not going to get involved in any more wars, which is not necessarily a safe assumption.

So will these military spending cuts actually get through Congress?

Not likely.

The Republicans control the House of Representatives, and they are not likely to take too kindly to large cuts to the defense budget.

In fact, the truth is that not too many of Barack Obama’s spending cuts are likely to survive in Congress.

As a recent article on CNN explained, Barack Obama’s budget plan must navigate a vast array of congressional committees in the coming months and by the time it emerges it is likely to be radically changed from its current form….

Before it gets back to Obama’s desk for a signature, the spending blueprint will go through no less than 40 congressional committees, 24 subcommittees, countless hearings and a number of floor votes in the House and Senate.

As our Congress critters have demonstrated over and over and over, they love to spend our money on some of the most wasteful things imaginable.

For example, a total of $3 million has already been granted to researchers at the University of California at Irvine so that they can play video games such as World of Warcraft.

Something seems to happen to people who get elected to Congress.  Almost all of them seem to develop an addiction to spending our hard-earned money.

Let us hope that something changes in that regard, because right now government debt is completely and totally out of control.

In fact, the U.S. national debt is currently increasing by approximately 4 billion dollars every single day.

In the end, if something is not done about all this debt it will destroy the entire U.S. financial system.

But our politicians just keep putting it off and putting it off.

Eventually we will reap what we have sown.  Debt is a very cruel master, and nobody can run from it forever – not even the U.S. government.

Shocking Video Of Howard Dean Declaring That It Is The Job Of The Government To Redistribute Our Wealth

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.

Benjamin Franklin once stated the following….

“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.

So now we have 19.3 percent of the workforce that is either unemployed or underemployed.

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.

10 Reasons Why Ordinary Hard-Working Americans Are About To Really Start Feeling The Squeeze

American families better get ready to tighten their belts again.  There is every indication that we are all going to really start feeling the squeeze in the months ahead.  The price of gas is starting to spike again.  The price of food is moving north.  Health insurance premium increases are being announced coast to coast and a whole slate of tax increases is scheduled to go into effect in 2011.  Meanwhile, household incomes are down substantially all over the nation and the U.S. government is indicating that there will not be an increase in Social Security benefits for the upcoming year once again.  So if the cost of most of the basic things in our monthly budgets is going up and our incomes are going down what does that mean?  It means that average American families are about to be squeezed like nothing we have seen in decades.

The reality is that it is getting really hard to make it out there.  Not only do most households have both parents working, but in many cases both parents are getting second or even third jobs.  Things have gotten so bad that millions of Americans have felt forced to turn to the government for assistance just to survive. 

It can be really disheartening to come to the end of the month and realize that despite your best efforts you have less money than you did at the beginning of the month.  But that is where millions upon millions of American families now find themselves. 

The economic despair in the air is almost palpable.  Already hordes of Americans are truly and honestly hurting and things are only going to get worse.

The following are ten reasons why ordinary hard-working Americans are about to really start feeling the squeeze….   

#1 Gas prices are going up again.  AAA says that the average price of a gallon of regular gasoline in the United States was $2.80 on Sunday.  That is 32.6 cents higher than it was during the same time period in 2009.  As oil and gas prices continue to go up, that is also going to have a significant impact on utility bills for American families this winter.

#2 The price of food is poised to rise substantially.  Bloomberg is reporting that the the cost of meat in the United States is going nowhere but up.  But meat is not the only thing that you will soon be paying much more for at the supermarket.  Wheat, corn, soybeans and almost every other major agricultural commodity is absolutely soaring this fall.  As this continues, it is inevitable that ordinary Americans will see much higher food prices at their local grocery stores.

On a previous article, a reader named Erica left a comment in which see detailed the stunning food inflation that she is seeing where she lives….

Food inflation is real, and it is here. Just yesterday I compared my receipt from a grocery run to prices I have from the same exact store from September 15, 2009. Bacon? Up 52% to $13.69 from $8.99 for 4 lbs. Butter? Up 73% to $9.99 from $5.79 for 4 lbs. Pure vanilla extract up 14% to $6.79 from $5.95. Chopped dried onions up a mere 2% but minced garlic (wet) was up 32%.

#3 It looks like those receiving Social Security are not going to be seeing cost-of-living increases again.  The Associated Press is reporting that the  U.S. government is expected to announce some time this week that the tens of millions of Americans that receive Social Security will go through yet another year without an increase in their monthly benefit payments.  You see, Social Security cost-of-living adjustments are tied to the official government inflation numbers, and according to the U.S. government there is basically very little inflation right now.  Of course we all know that is a lie, but it is what it is.

#4 The cost of health care continues to soar into the stratosphere.  Americans already pay more for health care than anyone else in the world, and yet costs continue to spiral out of control.  The cost of health care increased a staggering 9.6% for all U.S. households from 2007 to 2009.  Now, health insurance companies from coast to coast are announcing that they must raise health insurance premiums substantially due to the new health care law that Barack Obama and the Democrats have pushed through.  So in 2011 it looks like the average American family is going to have to carve out an even bigger chunk of the budget for health care.

#5 American families could desperately use a recovery in the housing industry, but that is simply not going to happen.  Foreclosure-Gate is getting worse by the day, and it threatens to bring the U.S. real estate industry to a complete and total standstill.  If it is ultimately proven that the paperwork for millions of mortgages in the United States is seriously deficient, it could push hordes of mortgage lenders into bankruptcy and render mountains of mortgage-backed securities nearly worthless.  Regardless, it is now going to be much more difficult to get a mortgage, much more difficult to buy a home and much more difficult to sell a home.  We could very well be looking at the next stage of the housing crash.  Ordinary Americans could end up losing trillions more in home equity.   

#6 More Americans than ever find themselves unable to pay their bills, and an increasing number of frustrated creditors are actually resorting to wage garnishment.  Yes, you read the correctly.  Creditors are starting to ruthlessly go after the weekly paychecks of debtors.

The following is an excerpt from a recent New York Times article that discussed the rise of wage garnishment as a weapon against debtors….

After winning, creditors can secure a court order to seize part of the debtor’s paycheck or the funds in a bank account, a procedure called garnishment. No national statistics are kept, but the pay seizures are rising fast in some areas — up 121 percent in the Phoenix area since 2005, and 55 percent in the Atlanta area since 2004. In Cleveland, garnishments jumped 30 percent between 2008 and 2009 alone.

So if you are getting behind on your debt, you better watch out – your creditors may soon decide to garnish your wages.

#7 Americans now owe more on student loans than they do on credit cards.  As hard as that is to believe, that is actually true.  Americans now owe more than $849 billion on student loans, which is a new all-time record. 

Student loan payments can be absolutely crippling to a household budget.  This is especially true for young Americans that have just gotten out of school.  Sadly, student loan debt is nearly impossible to get rid of.  Once you are committed, it will follow you around for the rest of your life. 

#8 Even as expenses rise, incomes are down from coast to coast.  Median household income in the U.S. declined from $51,726 in 2008 to $50,221 in 2009.  There are very few areas that have not been affected.  In fact, of the 52 largest metro areas in the United States, only the city of San Antonio did not see a decline in median household income during 2009.

#9 If all of this was not bad enough, now there are rumblings that the U.S. Federal Reserve is actually thinking that we need more inflation.  A number of top Federal Reserve officials have come out recently and have publicly supported the notion that the Fed needs to purposely create more inflation in order to stimulate the economy.  Of course what they don’t tell the American people is that inflation is a hidden tax on every single dollar in our wallets and in our bank accounts.  More inflation would be really bad news for ordinary Americans, because they are already having a tough time getting their dollars to stretch far enough. 

#10 Apparently the U.S. government (and many state and local governments) think that this is a great time to stick it to the American people by hitting them with a slew of new taxes.  There are so many tax increases scheduled to go into effect in 2011 that it is hard to keep track of them all.  In fact, there are many (myself included) that are calling 2011 “the year of the tax increase“.  But the Americans that are going to get it the worst of all are those that are going to get hit with the Alternative Minimum Tax.  One out of every six American households is going to be hit with a tax increase averaging $3,900 (thanks to the AMT) and most of them don’t even know that it is coming.

So did you think that 2010 was bad?

Well, you haven’t seen anything yet.

2010 was a Sunday picnic compared to what is coming.

Get ready to get squeezed.

Get ready for higher food prices, higher gas prices, higher health insurance premiums and higher taxes.

Get ready to try to do a lot more with a lot less.

Inflation is already here, but it is going to get a whole lot worse.  Meanwhile, the U.S. government (along with state and local governments) is going to continue to have a voracious appetite for more revenue. 

Average Americans are going to be squeezed until they have nothing left to give.  Then they are going to be squeezed just a little bit more.  

Are you ready?

22 Statistics About America’s Coming Pension Crisis That Will Make You Lose Sleep At Night

As the first of the 80 million Baby Boomers have begun to retire, it has become increasingly apparent that the United States is facing a pension crisis of unprecedented magnitude.  State and local government pension plans are woefully underfunded, dozens of large corporate pension plans either have collapsed or are on the verge of collapsing, Social Security is a complete and total financial disaster and about half of all Americans essentially have nothing saved up for retirement.  So yes, to say that we are facing a retirement crisis would be a tremendous understatement.  There is simply no way that we can keep all of the financial promises that we have made to the Baby Boomer generation.  Unfortunately, the crumbling U.S. economy simply cannot support the comfortable retirement of tens of millions of elderly Americans any longer.  The truth is that we are all going to have to start fundamentally changing the way that we think about our golden years.

Once upon a time, you could count on getting a big, fat pension if you put 30 years into a job.  But now pension plans everywhere are failing.  State and local governments are cutting back and are raising retirement ages.  A majority of Americans have even lost faith in the Social Security system, which was supposed to be the most secure of them all.

The reality is that we are moving into a time when there is not going to be such a thing as “financial security” as we have known it in the past.  Things have fundamentally changed, and we are all going to have to struggle to stay above water in the economic nightmare that is coming.

Part of the reason we have such a gigantic economic mess on the way is because we have promised vastly more than we can deliver to future retirees.  When you closely examine the numbers, it quickly becomes clear that a financial tsunami is about to hit us that is going to be so devastating that it will change everything that we know about retirement. 

The following are 22 statistics about America’s coming pension crisis that will make you lose sleep at night…. 

Private Pension Plans And Retirement Funds

1 – One recent study found that America’s 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008.

2 – Approximately half of all workers in the United States have less than $2000 saved up for retirement.

3 – According to one recent survey, 36 percent of Americans say that they don’t contribute anything at all to retirement savings.

4 – The Pension Benefit Guaranty Corporation says that the number of pensions at risk inside failing companies more than tripled during the recession.

5 – According to another recent survey, 24% of U.S. workers admit that they have postponed their planned retirement age at least once during the past year.

State And Local Government Pensions

6– Pension consultant Girard Miller recently told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.  When you break that down, it comes to $22,000 for every single working adult in California.

7 – According to a recent report from Stanford University, California’s three biggest pension funds are as much as $500 billion short of meeting future retiree benefit obligations.

8 – In New Jersey, the governor has proposed not making the state’s entire $3 billion contribution to its pension funds because of the state’s $11 billion budget deficit.

9 – It has been reported that the $33.7 billion Illinois Teachers Retirement System is 61% underfunded and is on the verge of total collapse.

10 – The state of Illinois recently raised its retirement age to 67 and capped the salary on which public pensions are figured.

11 – The state of Virginia is requiring employees to pay into the state pension fund for the first time ever.

12 – In New York City, annual pension contributions have increased sixfold in the past decade alone and are now so large that they would be able to finance entire new police and fire departments.

13– Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management recently calculated the combined pension liability for all 50 U.S. states.  What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds.  That is a difference of 3.2 trillion dollars.

Social Security

14 – According to one recently conducted poll, 6 out of every 10 non-retirees in the United States believe that the Social Security system will not be able to pay them benefits when they stop working.

15 – A very large percentage of the federal budget is made up of entitlement programs such as Social Security and Medicare that cannot be reduced without a change in the law.  Approximately 57 percent of Barack Obama’s 3.8 trillion dollar budget for 2011 consists of direct payments to individual Americans or is money that is spent on their behalf.

16 – 35% of Americans over the age of 65 rely almost entirely on Social Security payments alone.

17 – According to the Congressional Budget Office, the Social Security system will pay out more in benefits than it receives in payroll taxes in 2010.  That was not supposed to happen until at least 2016.  The Social Security deficits are projected to get increasingly worse in the years ahead. 

18 – 56 percent of current retirees believe that the U.S. government will eventually cut their Social Security benefits.

19 – In 1950, each retiree’s Social Security benefit was paid for by 16 U.S. workers.  In 2010, each retiree’s Social Security benefit is paid for by approximately 3.3 U.S. workers.  By 2025, it is projected that there will be approximately two U.S. workers for each retiree.

20 – The shortfall in entitlement programs in the years ahead is mind blowing.  The present value of projected scheduled benefits surpasses earmarked revenues for entitlement programs such as Social Security and Medicare by about 46 trillion dollars over the next 75 years. 

21 – According to a recent U.S. government report, soaring interest costs on the U.S. national debt plus rapidly escalating spending on entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every single dollar of federal revenue by the year 2019.  That is before a single dollar is spent on anything else.

22 – Right now, interest on the U.S. national debt and spending on entitlement programs like Social Security and Medicare is somewhere in the neighborhood of 15 percent of GDP.  By 2080, those combined expenditures are projected to eat up approximately 50 percent of GDP.

11 Signs That The U.S. Government Has Become An Overgrown Monstrosity That Almost Every American Is Dependent Upon For Economic Survival

Today, the number of Americans who are able to financially survive without any reliance on the U.S. government whatsoever is declining at a staggering rate.  Whether it is through direct handouts, entitlement programs, student loans, government bailouts, government contracts or direct employment, the truth is that now a solid majority of the American people are at least partially dependent on the federal government for their economic survival.  The sad thing is that the majority of the American people say that there is too much government in their lives when opinion polls are taken, but if you try to take the government check that they are getting away from them those same people will scream bloody murder.  But the truth is that it is getting to be really, really hard to be completely independent of the U.S. government economically.  That is because the U.S. government has their hands in almost everything.  The ideal of a “limited federal government” has long since faded away.  Very few people seem to believe in it anymore.  Instead, Americans today look to the federal government as the answer to all of our problems, as the provider of all of our needs, and as the regulator of every single detail of our lives. 

The U.S. government has become the “Big Mother” that we all scramble to for a handout when we get into trouble.

When you sit down and really analyze it, you quickly realize that there is no way that the U.S. government can be extricated from the U.S. economy now.  Instead of the free enterprise system that we once had in this country, today we have a situation where the U.S. government has become the very core of the economy.  It is the hub around which everything else in the economy revolves.

You don’t believe this?

The following are 11 signs that the U.S. government has become an overgrown monstrosity that almost every American is dependent upon for economic survival…. 

#1) The Explosion Of Government Handouts

39.68 million Americans are now on food stamps.  Millions of others are completely dependent on the extended unemployment benefits that they are receiving.  Millions of other Americans are able to survive financially because of the dozens of other welfare programs that the U.S. government subsidizes.  More Americans are receiving some form of welfare than ever before in history, and each month the numbers continue to go up.  Could there come a day when we all receive government handouts every month?

#2) The Entitlements Programs That Threaten To Destroy U.S. Government Finances

Entitlements are the single biggest U.S. government expense.  These programs include Social Security, Medicare, Medicaid and other social Ponzi schemes.  Tens of millions of Americans receive government assistance through these programs.  In fact, nearly 51 million Americans received $672 billion in Social Security benefits in 2009.  We all have friends or family members who receive these kinds of payments.  But cutting so many people a check year after year is slowly but surely destroying U.S. government finances.  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.  That is before a penny is spent on anything else.  This is clearly not a sustainable financial situation by any definition, but who wants to tell tens of millions of Americans that their checks are going to be reduced?

#3) The U.S. Government Is Now Even Paying Mortgages

Yes, you read that right.  As part of the “stimulus” package, the U.S. government is going to send money to some of the states that were hit the hardest by the real estate crisis.  So what is that money going to be used for?  Well, Florida, Michigan, California and Arizona have all announced that they plan to use $1.4 billion the Obama administration is sending their way to help the unemployed and the “underwater” pay their mortgages.

#4) Without The Student Loan Program A Huge Percentage Of College Students Would Not Get An Education

The federal student loan program (which was recently entirely nationalized) helps millions of college students pay for their education.  Without this assistance by the government, a lot less students would be going to college.  In fact, many of you that are reading this article directly benefited from the federal student loan program.

#5) The Bailout Of AIG

One of the biggest insurance companies in the world, AIG, would not be in existence today if not for direct federal government intervention.  It kind of makes you wonder what George Washington and Thomas Jefferson would think about a federal government that hands big bags of cash to a giant insurance company so that it can survive.  Whether it was so they could pay off their debts to Goldman Sachs or whether it was so that they could keep paying out record-setting bonuses, the truth is that AIG would not have made it without the federal government stepping in.

#6) The “Too Big To Fail” Banks

But it wasn’t just AIG that got bailed out.  A number of big banks may have gone under if not for the U.S. government.  The U.S. government decided that they were “too big to fail”.  Well, what about all the small banks that are going under?  The truth is that they are “too small to bother with”.  We now live in a nation where the U.S. government is the one who decides which banks live and which banks die like dogs.  Doesn’t that just make you feel all warm and fuzzy?

#7) The Bailout Of General Motors

But not only does the federal government bail out financial institutions – it is also now in the car business.  Yes, grand old General Motors may have ended up on the scrap heap of history if not for the U.S. government stepping in.  So if you work for General Motors or if you work for any company that does business with General Motors, you can thank Uncle Sam for the fact that you still have a job.

#8) The Bailouts Of Fannie Mae and Freddie Mac

If the U.S. government had not bailed out Fannie Mae and Freddie Mac, we may not have much of a mortgage industry at this point at all.  According to Inside Mortgage Finance, government-related entities backed 96.5% of all home loans during the first quarter of 2010, which was up from 90% in 2009.  So if you borrowed money to buy a home over the past couple of years, there is a very strong likelihood that the U.S. government was involved.

#9) The U.S. Government – The Nation’s Biggest Employer

According to the Bureau of Labor Statistics, approximately 2 million civilians work for the federal government, excluding the Postal Service.  When you add in all U.S. military personnel, that number goes much higher. 

The truth is that as the government continues to expand (become more bloated), more Americans than ever are hopping aboard the gravy train.  Today, the average federal worker now earns about twice as much as the average worker in the private sector.  So if you want to do little work, produce little of real value and enjoy super cushy benefits, maybe you should apply for a job with the federal government too.

#10) Millions Of Americans Are Employed By Firms That Rely On Government Contracts

When considering the impact of the U.S. government on the economy, you can’t forget the hundreds of companies that would go out of business if their U.S. government contracts were taken away.  There are literally millions of people who work for companies that do business with the government.  If the government disappeared it would cause economic chaos for those firms.  The truth is that a whole lot of people make a really good living plugging into the sweetest revenue source of them all – the U.S. government.

#11) The U.S. Government Takeover Of The Health Care System

The U.S. government takeover of the health care system is going to fundamentally change the economics of the health care industry.  The U.S. government will now play a major role in deciding which hospitals get built and which do not.  Approximately 17% of U.S. GDP is spent on health care, and now the U.S. government has unprecedented control over where that money goes.  Over a dozen new taxes have been established by the new health care reform law, and the U.S. government is going to pour an unprecedented amount of money into the system.  So will this result in all of us getting better health care?  We’ll just have to wait and see.

The truth is that the Founding Fathers never envisioned a federal government that completely dominated that national economy.  But that is what we have got.  As of now, only a very small percentage of Americans are still able to say that they are completely financially independent of the U.S. government. 

You see, in economic terms the U.S. government is not just the elephant in the room.  It is the elephant that sat on the room and nearly suffocated everything else out of existence.

As Americans, we live in an economy that is so intertwined with the government that it is impossible to separate the two anymore.

But the really bad news is that the U.S. government is in massive financial trouble.  According to one new report, the U.S. national debt will reach 100 percent of GDP by the year 2015.  Many economists regard that as an incredibly dangerous threshold to cross.

If U.S. government finances collapse, it will mean the collapse of the entire U.S. economy as well.  There is simply no separating the two.  And considering the fact that the U.S. government has piled up the biggest mountain of debt in the history of the world, things don’t look promising.

America is headed for an unprecedented economic collapse, and the U.S. government is leading the way.  If you can get financially independent, now is the time to try to do that, but the reality is that we will all feel massive economic pain when this thing comes crashing down.

The Silent Entitlements Monster: Social Security, Medicare And Interest On The Debt Will Gobble Up Every Single Tax Dollar By 2020

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.

But something has to be done.

The 2009 Financial Report of the U.S. Government was recently released, and it basically says that the U.S. government is facing financial Armageddon if something drastic is not done….

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.

In a section about Social Security and Medicare, the authors of the report confessed that “it is apparent that these programs are on a fiscally unsustainable path”.

Obviously something has got to give.

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.

But by then it will be too late.

The Mystery Of The Shemitah

The 2009 Financial Report Of The U.S. Government Is Out – America’s Economic Goose Is Cooked

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.

In a section about Social Security and Medicare, the authors of the report freely admitted that “it is apparent that these programs are on a fiscally unsustainable path”.

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.

Very interesting.

Anyone have any comments?

Austin Coins

 

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