Think antelope-type intensity! The lion has roared. His breath is hot, his teeth like razors—and if you don’t move, you are dead. Run! Now!
You have all seen a lion in chase, and how the adrenaline-pumping antelope bursts into flight. It runs like its life depends on it—because it does. This is the type of intensity you need now to get your financial house in order and prepare for the looming economic collapse. And you need to move now, before you get crushed by the herd.
Last week, President Obama’s bipartisan deficit commission released a draft report on fixing America’s budget problems. The Examiner called it “shock therapy” for America. cnn said it was a “call for action.”
Either way it was a wake-up call to just how precarious of a position America is in.
The good news is the authors think America can be saved. The bad news is that if all the spending cuts, asset sales, and tax increases are implemented, America’s formerly plush landscape will resemble barren wasteland, possibly for years to come.
America’s problem is that 40 cents out of every budget dollar spent is borrowed. The government will add $1.3 trillion to the national debt this year alone.
Read that again. Forty percent of America’s current federal expenditures is borrowed. How long can you borrow 40 percent of your yearly salary on credit cards and personal loans before the interest payments leach the life out of you and you start defaulting?
At present, Social Security, Medicare and Medicaid take up all of federal revenue, reported the authors. “The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans—the whole rest of the discretionary budget is being financed by China and other countries,” said Alan Simpson of Wyoming.
What has America become when entitlement programs take up 100 percent of tax revenue?
This cannot go on for long. Therefore it won’t. This is why you need to get out of debt, ramp up your savings and investments, and change your way of life before it is too late. “We can’t grow our way out of this,” former White House Chief of Staff Erskine Bowles said. “We could have decades of double-digit growth and not grow our way out of this enormous debt problem.”
That is how bad it is. Decades of double-digit growth and America still wouldn’t be able to escape its debt problem! America’s national debt is already close to 90 percent of gross domestic product. By this time next year it could be approaching 100 percent, which is pretty close to European crisis levels.
Of the problems facing America, one of the biggest is Social Security—or lack thereof. Last year, Social Security went negative. More benefits were paid out to retirees than was collected in taxes. The recession has wrecked the financial models. Planners apparently never considered that America could ever suffer a moderate recession. Now the plan is in the red and is expected to be in the red again next year.
By 2037, Social Security will have no money, reports the commission. Millions of workers who paid into the system will have nothing. And that is the best-case scenario. If the economy doesn’t get back to 3 to 4 percent growth, and quickly, the fund will be out of money much sooner.
The situation is actually even more dire—because politicians have stolen the Social Security trust fund money. There is no Social Security trust fund. The money has been spent. In its place are $2.5 trillion worth of government ious (in the form of treasury bonds).
Now that Social Security is in the red, instead of the government being able to pilfer the money for general spending, it has to pay it back. It is a double whammy to the budget.
Worse yet, all those ious could disappear overnight. What if the U.S. dollar were ever to collapse? All those government treasuries would be worthless.
It is sad because there is no need for Social Security to be broke. Just keep your hands off what is not yours.
Think of what $2.5 trillion could have bought American taxpayers. It would have been the largest sovereign wealth fund in the world. Instead of government ious, the fund could have been owners, or minority owners, of the best companies in the world—and all those corporate profits would be flowing toward Americans. After all, that is exactly what the Arabs, Russians and Chinese do. They take their surpluses and buy strategic assets.
$2.5 trillion would buy a 49.9 percent interest in Exxon Mobil, PetroChina, Apple, PetroBrazil, Industrial & Commercial Bank of China, Microsoft, China Mobile, Hong Kong Mobile, Berkshire Hathaway, China Construction Bank, bhp Billiton, Wal-Mart Stores, Royal Dutch Shell, Nestle, hsbc, General Electric, Johnson & Johnson, Procter & Gamble, ibm, AT&T, Chevron, Vale, Novartis, JP Morgan Chase, Pfizer, Coca-Cola, Oracle, Rio Tinto and Bank of America.
In case you are wondering, those are the 28 biggest companies in the world, according to the Financial Times. In fact, the trust could have owned many more companies too, since the funds would have been invested years ago when these companies were worth just fractions of their current value.
Nevertheless, the deficit reduction commission says Social Security can be saved. Politicians simply need to slash payouts, raise the retirement age and jack up contributions by employees and employers. Easy. And oh, hope that the dollar stops plummeting.
Actually, the commission seems to present a thorough picture of what could be done to balance the national budget. There are lots of options, none of them fun. Different scenarios include: a trillion dollars’ worth of new taxes; eliminating the mortgage interest deduction; selling off 64,000 government buildings; plus major Medicare reductions. Other options include slashing government employment by hundreds of thousands, eviscerating the military budget, reducing foreign aid and jacking up gasoline taxes.
The next question is what will politicians choose to do with the report.
They know the danger facing the country. Will they be able to put aside differences and for once—just once—act for the welfare and benefit of the nation?
Don’t count on it. The recommendations are dead on arrival, pronounced former Speaker of the House Nancy Pelosi. They are “simply unacceptable.” And as far as Republicans are concerned, some of them are already backing away from campaign promises to eliminate earmarks. Wasn’t the election just a few weeks ago?
“If Republicans are going to commit to what they ran on, that means making some awful hard decisions that aren’t very popular politically,” says Chris Lehane, a Democratic political strategist. “At the end of the day, if they’re really serious about putting government on a diet, what they’re talking about is a liquid diet. Are they going to cut back on Social Security and Medicare? They could look at other places, but those are tiny amounts of money.”
Many Republicans looked upon the recent elections as a turning point for the country. Not likely. At a time when decisive, dramatic action is needed to put the nation’s financial house on track, the polarized nature of politics in America means the country will instead be gripped by paralysis.
Paralysis can be deadly. When the lion roars, an antelope had better already be in motion. If not, he will soon be dead.
If you are weighed down with debt, you need to shed some pounds to make your getaway. Work the overtime, or get that second job now while it is still available. If you continue to rely on debt to finance your standard of living, you will be ruined. Hard times are coming to America. The fat years are over.
