If the politicians in Washington DC didn’t bring suffering to so many people, their posing with respect to this “fiscal cliff” would be laughable.
First, none of them intends to do anything substantive about the biggest problem of all: the Trillion Dollars the US spends each year on its war machine to maintain its rapidly fading pretense that Earth is part of the US Empire.
Second, none of them are including in their fake calculations the five additional bailouts that they all know are either already in play or right on the doorstep. The four new ones:
- US Postal Service—losing $ billions every quarter
- FHA—after “quasi-government” housing stimulus and campaign-finance corporations Fannie Mae and Freddie Mac went bust because they had enabled millions of insane mortgages, the FHA took over their role and rose from relative obscurity to be the new Federal backer extraordinaire of insane mortgages. As predicted by honest observers, it now needs a bailout.
- PBGC—the Pension Benefit Guarantee Corp is now operating in the red.
- Student Loans—with the default rate now going exponential, everyone involved in this $ Trillion market will need a bailout. Check the trend on this chart of the 90-day default rate:
The government headline admits that 11% of these loans are in default, but a reading of the fine print says it’s closer to 22%. That’s 22% of a $ Trillion in loans.
And the bailout that is already well underway:
Social Security—What? Some politicians claim the SSA is good through 2033. Strange claim, given that SSA will run $162 billion in the red for 2012. Well, they say it’s “only” a $47 billion deficit because there was a special payment from the Treasury of $115 billion to offset the “temporary” payroll tax cut. And if you think this year is some exception, the deficit for 2011, before the payroll tax cut, was $46 billion. One of the largest problems for Social Security is this: as cash was paid into the program into what was supposed to be the Social Security Trust Fund, the government spent that money and put IOU’s in the Trust Fund. Well, given the ultra-low interest rates paid on government IOU’s due to the low interest rate regimes run by Greenspan and Bernanke, the Trust Fund is earning at least $700 billion less in interest over the next 10 years than they thought they would be earning. So that thing about SSA being OK though 2033? Oops. For a look at the unhappy calculations, see this.
So how did this happen?
Here is a huge contributor: As reported by the World Bank, government statistics collected from around the world—and pretty much everyone agrees that government stats are just a bit biased to the upside—say that the global economy grew by a total of 9% from 2001 through 2011. By those same stats, in 2001, the US economy was 32% of the total world economy. By 2011, the US economy was just 22% of the world economy. That’s a huge 32% reduction in global market share for the US. These calcs are here.
So the question is: How does a country have its economy shrink by 32% in terms of its share of the world economic pie and yet keep spending a $ trillion a year on war and keep all of its benefit programs and government agencies intact? Doesn’t this lead to some type of breaking point? Normally, yes. But so far, the solution has been simple: the country borrows the money. In 2001, the US owed $6 Trillion. Now it owes over $16 Trillion. But won’t people stop lending to such a country? Yes, but the Federal Reserve prints up new money and buys the excess new debt authorized by Congress and issued by the US Treasury. For the next three years, the Fed admits to planning to buy virtually all of it. See Treasury Scarcity to Grow as Fed Buys 90% of New Bonds. Simple? Yes. Sustainable? Not in the recorded history of this planet.
So when you hear the cliff posers from both parties trying to score political points, remember that what they aren’t talking about is far larger than what they are talking about. And that what they aren’t talking will have a far bigger impact on all of us.