Federal debt and deficit set to destroy middle class
08/26/2016 / By Kurt Nimmo
Near zero interest rates, known as ZIRP in Federal Reserve parlance, have made a staggering US national debt relatively easy to handle. Despite low interest rates, however, an increase in spending will add to the burden of addressing a burgeoning deficit.
On Tuesday, the government released a report that blames lower-than-expected tax revenues for a significant rise in the federal budget. It’s one-third higher than last year.
The deficit is expected to rise from its current $590 billion to nearly 1.2 trillion by 2026.
The number is off by a country mile.
Congress exempts itself from including the cost of promised retirement benefits. Companies, state, and local governments are not permitted to do this and must report retirement commitments in financial statements as required by federal law.
“By law, the federal government can’t tell the truth,” accountant Sheila Weinberg of the Chicago-based Institute for Truth in Accounting told USA Today in 2012.
During his first year in office Obama oversaw a record deficit of $1.4 trillion. A large percentage of the cost was attributed to the government bailing out “too big to fail” banks in the wake of the subprime crisis.
The federal government and the establishment media claim the banks paid back the money but this is simply not true. “It was all a lie—one of the biggest and most elaborate falsehoods ever sold to the American people,” writes Matt Taibbi.
We were told that the taxpayer was stepping in—only temporarily, mind you—to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it.
A number of financial experts warn there is a new subprime crisis brewing — not in housing this time, but the national debt.
“In the 2008-2014 period, the largest growth has been in sovereign debt, up by 9.3% a year. This rate of growth far exceeds global GDP growth. Most forecasts have global GDP growth slowing this year and inflation levels for much of the world near zero. Together these factors mean that governments will have minimal tailwinds to help them service the increasing level of government debt,” writes Jonathan Rochford, a portfolio manager at Narrow Road Capital, which specializes in high-yield and distressed credit.
“In the U.S., federal, state and local governments have very large unfunded pension liabilities that will have worsened with the recent falls in equities and other risk assets.”
In April, Republican candidate Donald Trump pinpointed the national debt as the culprit. He fixed the blame on the economic policies of the Federal Reserve, in particular so-called quantitative easing.
“The problem with debt, as you go throughout the history of every country that got out of hand with debt, is there’s always been a debt implosion,” said money manager and Fox News contributor Gary Kaltbaum.
Economic Doldrums
The Congressional Budget Office has lowered it is projections of economic growth over the next several years due to lackluster results in 2016. It predicts a mere 2% growth in the economy this year and over the long term expects the GDP, or Gross National Product, to increase by a mere 1.7%.
“Weaker-than-expected economic growth indicated by data released since January, recent developments in the global economy, and a re-examination of projected productivity growth contributed to that downward revisions,” the CBO reports.
Left out of the equation is the effect of the deficit and national debt on the economy. If Congress continues adding to the national debt, as it did when it bailed out banks and continues to do in many other ways, and the debt reaches and astronomical 156 percent of GDP by 2040 as projected, the economy will shrink an additional 5 to 7%.
This will reduce projected annual income by between $2,000 and $6,000 per person and further decimate the middle class and lead to widespread poverty.
Sources:
Tagged Under: economic collapse
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