Friday, March 18, 2011

CBO has good news and bad news on the Obama budget. The good: deficit is much worse than predicted. The bad: the U.S. will collapse long before 2020.

Douglas Holtz-Eakin offers us a sobering snapshot of the latest Congressional Budget Office (CBO) report on President Obama's budget. I won't bore you with the details. Only a few low-lights are necessary.

• The national debt-to-GDP ratio rises above 87 percent - close to that of Greece.

• Their numbers are rosy because the CBO's deficit projections include $500 billion in Obamacare Medicare cuts without a so-called "doc fix". Obamacare also places immense obligations on state Medicaid systems when states can least afford them.

• The CBO predicts a downgrade of the U.S. as a sovereign borrower in only seven years. Put simply, the full faith and credit of our country is critically wounded as the federal government loses its coveted AAA credit rating. In short, it's like an individual having a crappy credit score: everything costs more.

The executive summary according to the Associated Press? "CBO: Obama understates deficits by $2.3 trillion."

In this case, the word "understates" means "lies about".

But, as you might expect, the real story is far worse than the CBO is letting on. After all, their analysts can only review scenarios as they are presented.

But over at MacroMon, a recent article explains why the world's largest bond investor shed his trillion-dollar-plus portfolio of U.S. Treasury debt. Hint: he thinks it's a really, really bad investment.

Background: the U.S. Treasury is prohibited from selling bonds directly to the Federal Reserve. Instead it sells them through so-called "primary dealers" (PDs) via auctions. But, as the graph depicts, the Federal Reserve is the one buying almost all new debt from the PDs, while paying hefty -- think hundreds of millions of dollars in markups -- for the privilege.

In short, the only folks willing to buy 10-year Treasuries that pay less than 3.5 percent would be your Federal Reserve. Which could explain why Bill Gross sold his U.S. debt when he did.

I don't mean to be Johnny Buzzkill, but I've got one more snippet for you.

In "Slouching to Fiscal Armageddon", Chris Banescu offers several ominous portents.

• The 2011 budget deficit is forecast to hit $1.5 trillion, the largest in history and 10% of America's total economic output (GDP)

• This follows a 2010 deficit of $1.3 trillion and a $1.65 deficit forecast for 2012. The three years under Democrat leadership have led to the most catastrophic deficits not just in U.S. history, but in world history.

• In those three years, the Obama Democrats have rung up $4.5 trillion in debt, double the entire $2.1 trillion incurred under eight years of the Bush 43 administration. This is an increase in deficit spending of roughly 570%.

• 40 cents of every dollar we now spend is borrowed.

• Within the next year, the country's debt will surpass our GDP.

• This year alone, we will spend $200 billion in interest payments -- and as we saw above -- those interest payments are being held extraordinarily low through a glut of short-term, low-interest financing; but as interest rates increase, as they must, we could hit $1 trillion a year in interest payments alone.

• And I haven't even touched upon the unfunded liabilities of Obamacare, Social Security, Medicare and Medicaid, which are projected to hit $144 trillion in unfunded obligations by 2015.

Now, consider the fact that the Democrats proposed a cut of $4.7 billion -- or about 25 hours of spending for the fiscal year 2012. As Banescu aptly puts it, "Clearly Democrats are not interested in helping this country avoid fiscal calamity."

A devastating debt crisis is coming; simple mathematics predict it. It is no longer a matter of if, but when. The time for hysterics, hyperbole, and finger-pointing is over. The time for political games, grand-standing, and partisan shenanigans is long past. This is no longer about Democrat, Republican, liberal, conservative, or progressive issues. This affects all of us. The looming danger crosses all party and ideological lines and jeopardizes all Americans, present and future generations. We're staring down a massive debt tsunami that threatens the US with a fiscal Armageddon the likes of which we've never seen.

Since Democrats and the White House are obviously unwilling to face reality and completely AWOL on this crisis, here's a call to action to the conservatives and the Tea Party lawmakers in Washington, our only remaining hope... [Republicans,] you're going to be demonized and vilified anyway, regardless of what you do, [so] make a stand and demand meaningful reductions in government spending... Didn't the ObamaCare battles and the last few decades of disastrous compromises with liberals and progressives teach you anything?

...Demand real action and sweeping reforms. Do not back down and compromise just to get along. It doesn't work! Be ready to shut down the government if you have to... Make the hard choices and stand behind your principles. That is real leadership!

Thus far, our feckless, RINO leadership in the House can't muster either the eloquence or the courage to explain the dire situation in which we find ourselves. They also can't seem to craft a Continuous Resolution to fund only those parts of the government -- i.e., not Obamacare -- that the American people want.

I urge you to call the offices of Speaker Boehner and Leader Cantor and explain to them -- politely but firmly -- that there is no flipping time to spare. None.

The fuse on the time-bomb, which was lit by the 111th Congress and a radical Statist President, has but a nub remaining.

Linked by: Michelle Malkin, Protein Wisdom and The Tatler. Thanks!

1 comment:

Anonymous said...

The collapse of this country has been the plan for some time, remember Bush 41 extolling the coming of A New World Order twenty years ago. There is no survival plan for a sovreign United States in a NWO. Obama is just putting the finishing touches in place. Not difficult to see if you are paying attention.