The Rag Reel


Thursday, June 10, 2010

Where to go from here?

To correct these problems and prevent further deterioration, a wise path forward would have to include important changes. To start, our governments need satutory budget controls that eliminate deficit spending. We simply must spend less. Second, all spending iteams need to be part of the fiscal budget process.

This is an especially painful problem in the United States, where costly war efforts don't even show up on a federal budget that is already more than $1 trillion overspent. Perhaps the most difficult solution involves reforming existing entitlement programs or considering new ones.

Aging populations and declining birth-rates make real reform in this area necessary and inevitable. Complicating the challenge is not just agreeing on such difficult decisions, but implementing them within a reasonable period of time.

We can help make that happen by supporting leaders and policymakers who focus on fiscal discipline, smaller government and economic freedom!

Tuesday, June 8, 2010

#3 Tipping Point!

   The third factor that should concern us all involves intrest expenses. Many of the world's leading economies are approaching a tipping point where there is little or no reasonable hope of ever being able to repay all their debts. In Britian, the national debt per child born this year is estimated at 20k euros . In Japan, it takes almost 60 percent of all tax reciepts just to service the national debt. Japan's situation would be even worse if the government could no longer sell most of it's bonds at below-market intrest rates to its citizens.

   During the five years ending in 2008, the "intrest" , just the intrest on U.S. debt went from $322 billion per year to $454 billion. That's a 41 percent increase by my calculations, and I'm just a english major, lol. Keep in mind those figures were before the government borrowed even more so it could spend trillions in "stimulus" dollars.

   Although the United States still has the largest and most diverse economy in the world, it is slowly becoming more and more vulnerable to its creditors, especially CHINA, which recently eclipsed Germany as the worlds largest exporter.

   Americans need to better prepare themselves for a new world in which the global economy is less and less dependent on the United States. Meanwhile, the debt clock keeps ticking, tick tock, tick tock....

#2 The Pain of Growing

   One of the most optimistic ways to deal with a debt trap is to assume your income is going to go up, despite lower investment in new opprotunities. This may not be realistic, but it sure sounds good, lol. Not surprisingly, many of the most optimistic governments budget proposals assume our economies will soon be growing at remarkable rates. It's true that robust growth can mean more jobs, more economic activity and most importantly for the government more tax reciepts. However, this growth is "inevitable" approach to budgeting is a lot like spending the winnings from your lottery ticket before you even know it's a winner; and the odds are that it's not, lol.

   To-date growth in the U.S economy has been nowhere near recent projections; and to make matters worse , an aging U.S. population will soon be paying less in taxes just when the government needs to payout more in retirement benefits. Japan is already feeling this demographic squeeze, as is much of the EU.