Economic Abyss

There is an 800 pound gorilla in our economic room and everyone acts like he doesn't exist. Everyone is worried about a recession, but that is just a bump in the road compared to the real problem with our economy. There is a much worse problem in our near future. Bush’s "shop till you drop" policy and the republicans lackadaisical attitude about borrowing money from our grandkids and foreign countries has exacerbated a problem that has been festering since the 1950's. Our country is now in grave peril. Plainly stated: we as a nation, are going bankrupt. We are spiraling downward to become a 3rd world country within the next 40 years and our politicians are to scared to talk about it.

We have been borrowing the money to pay for essential services and to prop up our economy for some time and we must find a leader strong enough to address the issue head on. We currently are borrowing $1.93 billion per day. That's $704 Billion a year. Even if you subtract out the $120+ Billion a year for the wars in Iraq and Afghanistan, we are borrowing approx. Almost 3/4 Trillion dollars a year to just to prop up our economy. The result of which will be an unfunded bill to the tax payer of between $46-$57 TRILLION by 2040-2050. The borrow-o-meter is spinning like a top and there is no end in sight.

The amount being borrowed is increasing daily. In 2007 the public debt was 36.8 percent of GDP. The total debt is currently 66.5% of GNP. If the borrowing stopped tomorrow, it would have immediate and catastrophic effects on our nation, but if it continues as it is, it will mean the end of our country as we know it.

To compound this, the dollar is in the toilet and there is no reason to expect it to regain ground any time soon against foreign currencies.

The dollar has been sliding for the past six years because conditions have reversed. The U.S. economy went into recession in 2001, and the recovery was initially weak. Today, economic growth is stronger in Europe, Asia and many parts of the developing world. And the dollar is under downward pressure from the United States' burdensome current account deficit -- the broadest measure of the trade gap and the result of borrowing billions of dollars worth of foreign money each day to finance spending and investment

These trends show no sign of reversing soon, but the sharp turnaround in one decade underscores the volatility of currency markets..

So our dollar is worth less and we are borrowing money like there is no tommorow, but yet our government has promised to give Social Security, Medicare, and Medicaid benifits to the approx 77 Million baby boomers who will retire in the next 20-30 years. The problem is that we have “0” dollars in the bank to pay for it. Currently we are running a surplus in the Social Security system, with more money coming in than going out. The money in this account is being used to pay for current recipients and the excess is immediately being borrowed by the government for use in the general fund to prop up current levels of spending (military, education...etc.). The IOUs for the money borrowed are worthless because there are no assets to back them up. By 2014, there will be no excess for the government to borrow. After that date, money will have to be borrowed from the general fund (education, military...etc.) into which the excess is being put now, to pay pensioners. As the number of retirees increase through 2040, the amount of money taken from the general fund will increase, decreasing the amount of money available for everything else.

We are currently borrowing billions of dollars a day just to prop up our current economy, and have no idea where the money to pay for these future obligations will come from.

In the United States, we have made promises to senior citizens that far exceed what we can pay for at current tax rates.

It is estimated that unless drastic measures are not taken almost immediately to reduce government spending and borrowing; and if we don’t start having a positive revenue flow soon, that by 2040, the interest on our national debt will equal the total amount of income the government receives in taxes. This means there will be no money for a military, no money for education, and no money for social programs, and no money for anything else other than to pay the interest on our national debt. Something has to be done now, and it has to be drastic.

Everyone should be required to watch this video by the former Controller General of the United States. He recently stepped down as head of the General Accountability Office to take up this issue full time. While in his former job, it was his mission is to help improve the performance and assure the accountability of the federal government for the benefit of the American people. He brings a perspective that is neither from the Democratic nor republican point of view. Since he was not an elected offical and his term ran for 15 years, he was in a unique position to "tell it like it is" without worrying about political consequences. He has been on a mission in the past few years, with both liberal and conservative economists at his side, to carry this dire message directly to the American people, because he knows that politicians, regardless of party, are too scared too.

Even if we continue to borrow money from foreign investors, how long is it going to be before no one's going to want to loan us money anymore? It is illogical to assume that we can continue to borrow money forever, and our economy will never grow enough to pay off this massive debt as some have suggested.

From the GAO website and the "US Financial Condition and Fiscal Future Briefing"

•Faster Economic Growth Can Help, but It Cannot Solve the Problem

•Closing the current long-term fiscal gap based on reasonable assumptions would require real average annual economic growth in the double-digit range every year for the next 75 years

•During the 1990s, the economy grew at an average 3.2 percent per year

•As a result, we cannot simply grow our way out of this problem. Tough choices will be required.

Therefore growing our way out of this mess is not an option. Besides tariffs on imports and taxes on the American People, there are only three ways to get the money required to pay off this massive debt.

(1) Borrow more money.
(2) Print more money.
(3) Sell or lease national assets

All are losing propositions for the American people. Because of our weak dollar, foreign investors are already buying up pieces of our infrastructure and other national assets at alarming rates just so that we, as a nation, can maintain the life style that we have become accustomed too. We have become little more than a flea market for foreign investors who use our own money to buy our infastructure and then charge us to use them.

Sooner or later, SOMEONE is going to have to tell the American people just how bad our economy actually is, how bad the consequences of our current lack of fiscal responsibility will make it, and what must be done to fix it, if it can be fixed. Every day it is ignored, billions of dollars more are borrowed that will have to be repaid by our children and grand children. Decimating their futures before they even have a chance to live them.

This is one of the most difficult issues that will have to be faced by the next 5 or more presidents, whoever they may be. This is not really a Democratic or republican issue, it is national survival issue. It's just ashamed that politicians have let it get this far out of control simply to curry votes because they did not have the guts to say what needs to be said to the American people.

This CAN has been kicked down the road by each generation of politicians for the next generation to solve. The road is finally coming to an end and there are no future politicians to pass this problem too. Baby boomers start retiring next year and their numbers will increase each year until 2040. The money to pay for their benifits will run out in 2014, after that, as the number or retirees increase, our government will have to raise taxes on the decreasing number of workers in the work force, borrow more money from foreign countries, and decrease the benifits to the retirees. There are no other choices. Every day we wait to make the tough decisions necessary to minimize this problem, the problem gets worse. Time has run out. IT MUST BE SOLVED NOW.

Each candidate in this year's election should be required to lay out exactly, point by point, how any new promises they make will be funded without increasing this debt, and what they intend to do to make sure this debt will be paid off and not be passed on to our children. In other words, any promises made by candidates during this and future elections should be projected out until the baby boomer's need for all 3 of these massive, government funded, programs end (about 2050). So that the American people can see upfront what negative impact their promises will have on Social Security, Medicare, and Medicaid through that period.

The problem is so enormous that it will require both parties to face tough undesirable realities. Medicare, Medicaid, and Social Security will ALL have to be cut and taxes will have to be raised drastically. This goes against everything both parties stand for. That's why neither side mentions it and all candidates avoid the consequences when making promises to get elected. If this problem goes unsolved, it will mean that those who pay taxes will have the heaviest tax burden this country has ever seen and those that receive benifits will not get anywhere close to the care they need.

We, as Democrats, should make this the most urgent issue of our time. We constantly, and rightly so, complain that republicans care about their own prospects and to hell with the future of everyone else. But as Democrats, won't we be doing basically the same thing if we fight for short term Democratic gains but ignore the effect those gains will have on the future of the generations that follow?

There is not a candidate out there who is willing to be completely honest with the American people about this problem, because he/she would never get elected to anything. The American people do not like the bearer of bad news and they will "kill the messenger because of the message", but the truth has to be told to the American people, loudly and clearly, whether they want to hear it or not. Once they understand the enormity of this problem they will demand that our politicians find a solution. It can not be ignored any longer. This is not just about fixing an economic problem, it is about the survival of our nation..

One Nation. Under Stress. In Debt.

I am one of a growing number of people who believe our nation is headed toward the most serious economic problem we have ever faced as a nation. A problem that if unaddressed, will make the "Great Depression" look mild in comparison. We still have a chance, although slim, to fix it before our nation comes crumbling down around us, BUT it will take immediate action by our next president and Congress AND the support of the American people.

We as Democrats, must make this the most important issue of our times. We care about America and its people, but unless we show our support for the tough decisions that must be made, we will be dooming our children and grand children to a unimaginable future.

I have posted many diaries on the work of David Walker and the problems facing our economy. Here are a few:

Economic Abyss, Economic Meltdown, Social Security and Medicare Crisis, The Selling of America, But they are just diaries

David Walker's organization is gathering steam in a move to bring this issue to the forefront of American consciousness and force politicians on both sides of the aisle to address it.

I received the following email this morning from the David Walker. It was also sent to thousands or millions of others, so I don't feel to special.

If you feel there is no problem, then ignore this diary. If you feel, as I do, that this problem exists and that ignoring it will not make it go away, then please follow the links in Walkers email below, READ AND SIGN HIS PETITION, and let's help him start the process. Nothing short of the future of our nation is at stake.

Dear Friend,

Can "we the people" really save our economy? Can we really force our government to face the inconvenient truth of the $53 trillion hole we're in? That's the sum of all the US government's current financial obligations including unfunded promises for Social Security and Medicare - a $455,000 bill for every household in this country.

The answer is "YES" - there IS something each of us can do. Click here to add your signature to a letter we're publishing in the New York Times (more on the letter below).

This new movement for fiscal responsibility is just a few weeks old. And yet, thanks to folks like you, we've already made significant strides:

Over 100,000 of you have already signed on to help us fight for fiscal responsibility in Washington and at home

Our effort already has been covered extensively by the media, ranging from the New York Times, ABC News and CNN to literally thousands of blog mentions (source: Technorati)

"I.O.U.S.A.," our feature documentary about the impending fiscal crisis, has made an incredible splash. Not only did the film get three and a half stars from Roger Ebert, and rave reviews from the New York Times and other critics, but it set an opening-day record for a documentary, thanks to a bonus post-screening town hall, and is about to break into the ranks of the top 100 highest-grossing documentaries of all time (source: BoxOffice Mojo).

That's right - a documentary about fiscal responsibility is about the break into the top 100! And the film is still in theaters in selected cities; Check here for the listings.

We've taken the first step together, and we've begun to build the movement that cynics claimed was impossible. We're sounding the alarm and America is waking up. Now, it's time to take it to the next level. Here's how you can help:

This Sunday, we'll be publishing a letter across two full pages in the New York Times calling upon the presidential nominees to move beyond the "denial" stage, recognize that America has a $53 trillion problem, and start taking steps to solve it. This letter will be signed by a bipartisan group of some of the country's most prominent leaders in finance and fiscal policy-making, and by representatives of young people's organizations around the country. You can add YOUR name by visiting www.PGPF.org today. Please help us make this letter one our next President can't ignore.

Are you on Facebook? If so, please visit the Peter G. Peterson Foundation and I.O.U.S.A. pages and become a fan today.

And finally, spread the word! Forward this e-mail to your 10,000 closest friends.

We've started a movement for fiscal responsibility - a movement few thought possible. And with your help, we will wake up America and set the nation on a course toward a more secure future and a brighter tomorrow.

All the best,
Dave Walker
President and CEO,
Peter G. Peterson Foundation