Posts Tagged ‘U.S. Debt Crisis’

Captain Rick: The Senate and House passed a short-term spending bill that prevented a government shutdown at the end of the week. It has White House backing.

This legislation allows Congress to ‘kick the can down the road’ until after America elects a new President and new members of Congress. With a bunch of ‘lame ducks’ residing in congress at that time, you can bet they will again ‘kick the can down the road’ with another short-term spending bill to fund the government until after a new President and Congress take office in January. That’s when the excitement begins …

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Fights over raising the debt limit broke out between the Obama White House and ruling Republicans in Congress in 2011 and 2013, unsettling Wall Street and foreign investors. The two sides struck a deal in 2015 to suspend the debt limit until Obama left office. The federal debt limit has been suspended since late 2015, but the law is set to be reinstated on March 16, 2017. The current debt limit of $20.1 trillion will be breached and another funding emergency will be at hand to prevent another U.S. government shutdown.

Government shutdowns in the past have become a ‘joke’ in that certain federal employees are told to stay home without pay, until Congress passed legislation to fund the government, which often included increasing the national debt and awarded compensation for all lost pay … meaning their time off was really an extra paid vacation; an insult to hard working employees of ‘Main Street’ America. The ‘Shutdown Game’ can not continue much longer because America is coming ever so close to falling off of the real and pending ‘Fiscal Cliff’. Many federal programs like Obamacare, Medicaid, Medicare and even Social Security are projected to implode in coming years without serious spending/taxation reform.

The U.S. National Debt has more than doubled since President Obama took office; from $9 trillion to $19.5 today. It is exploding at rate of $1.35 trillion each year. More than $10 trillion of ‘red ink debt dollars’ have been spent to keep the federal government functioning during the Obama Administration.

About 15% of money spent by the federal government has no revenue to support the expenditure and thus adds to the national debt. Much of this debt spending goes to states and cities in the form of federal grants. Our states and cities ‘drink up’ the grants like it is ‘free money coming from heaven’. Their philosophy is ‘if we don’t get the grant, some other city or state will’. What an awesomely greedy and fiscally reckless way to think. Shame on every city and state in America for slurping up these slush grants which add to the mushrooming U.S. National Debt. Our cities and states are a main contributors to the growing problem of America’s National Debt … debt which will be placed upon future generations to pay back … including our children and grand children. It’s a serious matter to think about.

I hope the next President and Congress will begin to balance the budget and curtail deficit spending. Saving America from falling off of the real and pending ‘Fiscal Cliff’, will not be easy. It will require ‘belt tightening’ by people, cities and states across America and most importantly by the U.S. Federal Government and our elected representatives in the U.S. Congress.

Captain Rick: U.S. Job Growth has crawled upward to pass the break-even rate with with population growth. The trend is in the right direction. The jobs being added are mostly low wage. There is little hope of regaining the 8.7 million medium to high wage jobs lost during the Great Recession any time soon.

The chart below shows the new jobs added during each month of the the past year. 

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GREEN LINE: an average of 214,000 new jobs have been created each month during the past year

BLUE LINE: an average of 185,000 new jobs need to be created each month to keep up with U.S. Population growth of 0.7%

REAL JOB GROWTH: is represented by the difference between the Green and Blue lines … 29,000 new jobs each month that exceed population growth.

How long will it take to recover the 8.7 million jobs lost during the Great Recession: At the ‘Real Job Growth Rate’ of 29,000 new jobs per month, it will require 300 months … or 25 years. That is a long time, during which many other significant concerns will come into play … like the U.S. Debt crisis … on track to explode during the next decade.

Wages remain stagnated: Federal Reserve Chair Janet Yellen has said she wants to see wages rise faster than inflation so American households will have more buying power. That has yet to happen. I personally think Janet and the entire Fed are living in a ‘dream cloud’.

New poll show majority rating the U.S. economy as ‘Poor’: Many Americans still think the economy is not fully recovered. According to the results of a CNN/ORC International poll released Friday, 41% of people surveyed rate the economy as "good", while 58% rate the economy as "poor."

Perceptions about the U.S. economy will be a key factor in November’s midterm elections: More than a third of the Senate and the entire House are up for grabs. Both sides of the aisle are blaming each other for holding back the recovery. I blame almost all of them. I hope the American voters will exercise their thoughts and register their voices in the upcoming elections and vote out of office the majority of those now in office.

Captain Rick’s Prognosis: America is traveling into uncharted territory, which if not handled properly by the U.S. Congress (which is very unlikely, based on performance in the past decade), has the potential to drive America over the pending ‘real fiscal cliff’ and reduce America to a ‘third world nation’.

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Captain Rick: Final U.S. GDP for Q4 2013 was a disappointing 2.4%, downgraded from the earlier estimate of 3.2%. Early estimates are notoriously optimistic. This GDP figure sounds a wake-up alarm that America is stuck in the GDP ‘Anemic Zone’ … a place between zero real growth and ‘Recession’. 

GDP (Gross National Product) is the broadest means of quantifying the health of an economy. GDP is the monetary value of all the finished goods and services produced within a country’s borders.

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BLUE LINE: 3.0% GDP Growth is required to keep up with U.S. Population Growth. GDP above the blue line represents real growth that adds real jobs. GDP below the blue line indicates real economic decline that is loosing real jobs. GDP below the blue line, but above zero line (‘Recession’), is what Captain Rick calls the ‘Anemic Zone’.

RED LINE: 2.24% GDP Growth is the average of what the U.S. economy scored in the past 8 quarters (2 years). This demonstrates that the U.S. economy is stuck in the economic ‘Anemic Zone’…not mustering enough growth to keep up with population growth. 

What caused the recent GDP decline?

Weakness in the housing sector is a factor. Investment in residential real estate slowed for the first time in three years. I see that as good, as the previous pace was heading rapidly towards another real estate bubble.  Real estate values have peaked and have begun decline in some areas of the U.S., like Gilbert, Arizona that led the value resurgence a few months ago.  

Perhaps the decline in federal QE (debt) spending played the biggest role as a result of the $20 Billion reduction QE (debt) spending per month. The latest GDP decline demonstrates the power that debt spending can have on the economy. If the U.S. were to curtail the remaining $65 Billion in QE debt spending per month, the U.S. might slip into recession. The bottom line is that the U.S. QE debt spending helps the U.S. economy look like its only anemic…when it is actually in recession. This will play out as the Fed is forced to reduce QE debt spending to keep the U.S. from going over the new U.S. Debt Ceiling, recently raised to $17.2 Trillion by the U.S. Congress.

U.S. Fiscal Reality Check

U.S. GDP: $16.1 Trillion

U.S. National Debt: $17.4 Trillion (already exceeds new ceiling), ($55,000 per citizen, $151,000 per tax payer)

U.S. Debt held by foreign countries: $6 Trillion

U.S Federal Spending: $3.5 Trillion

U.S. Federal Revenue: $2.9 Trillion

U.S. Federal Deficit: $0.6 Trillion

Source: USDebtClock.org

What does this GDP data mean concerning the future of America?

America is stuck in a land of anemic growth…actually declining in real growth because its economy can not consistently rise above 3% growth … a level required to produce enough jobs and income to keep pace with population growth. In reality, this means that America is declining in economic strength. In the coming few years America faces an astronomical increase in expenditures due to entitlement programs like Social Security, Medicare and welfare programs like Medicaid and Obamacare. America’s relatively level revenue will not be able to cover the mushrooming expenditures. Congress will not be able to address this problem by simply ‘kicking the debt can down the road’ as it has in recent years. At some point soon, the fiscal mess that is brewing will explode as America plunges over the pending ‘real fiscal cliff’.  At the bottom lies America as a third world country.

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Captain Rick: Thomas C. Patterson, a former Arizona State Senator, sees the Compact for America as a test to see if Americans are still able to take their future in their hands or if they are content to see America continue its decline. States have constitutional authority to amend the U.S. Constitution to require a balanced budget. This is a ‘long shot’ but it offers a ray of hope to save America from pending fiscal decline.

The U.S. Congress recently raised the U.S. National Debt Ceiling to an astronomical $17.2 Trillion, exceeding U.S. Gross National Product … a wake-up call for any nation. The U.S. Congress raised the debt ceiling to accommodate current spending levels and thus kicked ‘America’s debt can’ down the road again for the Nth time to deal with after the fall election.  The sad fact is that with the cost of entitlement programs like Social Security, Medicare and pure welfare programs like Medicaid, greatly expanded by Obamacare… U.S. spending is mushrooming at an alarming pace, while revenue is increasing at a snail’s pace that can not keep up. I see this resulting in America sailing over the real ‘fiscal cliff’ in the not too distant future… an event that has the potential to reduce America to a third world country.

I invited Thomas, whom I have long admired for his excellence in thinking, to present guest commentary. With his acceptance, I asked him to tell us why his commentary is important to Americans. His reply:

Thomas C. Patterson: “I see the Compact–a constitutional convention of the states–as a test for Americans.  Are we still able to take our future into our hands, like our founders did, to forge the nation we want or are we content to see America continue its decline?  Do we care enough about our posterity, as our founders did, to undertake the most difficult, improbable shared national initiative in our time or will history judge us as standing by while a nation founded in liberty slides into oblivion?”

ABOUT: Thomas C. Patterson is a graduate of Yale University and the University of Nebraska. He was elected to the Arizona State Senate in 1989, serving as minority leader from 1991 to 1992 and majority leader from 1993 to 1996. Patterson was the author of legislation creating Arizona’s charter school system and welfare reform program. Until 1998, he was a practicing physician and president of Emergency Physicians, Inc.. Patterson also served as president of the Arizona chapter of the American College of Emergency Physicians. In 2000 he became chairman of the Goldwater Institute. Thomas is a retired physician and resident of Paradise Valley, Arizona.

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Guest Commentary

by

Thomas C. Patterson

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More Americans than ever feel our federal government has been permanently taken over by special interests and collectivists.

Dependency on government is reaching ominous levels. Spending that exceeds income has become part of our political culture. We feel like shouting that our debt is dangerously high and that it’s immoral to pass on to future generations the consequences for our self-indulgence.

Yet realistically, there doesn’t seem to be much we can do about it. Until maybe, just maybe, now.

The answer to our despair may well lie in the Compact for America, an agreement among the states to come together to propose a Balanced Budget Amendment to the United States Constitution. This idea is so promising and dynamic that is gathering momentum across the states, including ours, where it is known as HB 2305.

Here’s the skinny. The U.S. Constitution gives the states the power to call a constitutional convention, as a protection against central government overreach. The framers’ expectation was that once every generation or so, states would need to convene and tweak the Constitution to respond to evolving conditions and to protect the rights of people from the inevitable tendency of power to centralize.

The framers were prescient in understanding that the states would need this privilege, but for one reason or another the states have never called a convention. Every amendment proposed to the Constitution has come through Congress, the other authorized pathway.

It is said that the founders didn’t include a balanced budget provision in the founding documents because they thought it unnecessary. Now that incomprehensible levels of fiscal recklessness have become the norm, the potential need for the states to intervene is clear.

The problem is that, since the states have no experience with a convention, several concerns have arisen over its execution. How would the convention delegates be selected, how would votes be apportioned, how would leadership be chosen? More importantly, what about a runaway convention? What would stop interest groups from taking over the convention and bending the Constitution for their own hot-button issues?

It’s worth remembering that any proposed amendment would have to be ratified by three-fourths of the state Legislatures. But these are serious questions asked by serious people and they deserve answers.

Here’s the genius of the Compact for America. It allows states to know the answers to all the pertinent questions, including exactly which amendments may be considered, before they sign on. When state Legislatures pass a resolution agreeing to the contact, they become part of a constitutionally recognized organization of states created for the express purpose of proposing constitutional amendments. The selection process for delegates, convention logistics and even the text of the amendment would be in the compact document itself.

Would this be difficult? Would there be opposition from all sides? Are there still questions to be answered? Yes, yes and yes. Vast private and government interests are heavily invested in business as usual. Moreover, compacts require the blessing of Congress, although this has been previously granted.

But the Compact for America isn’t constitutional craziness, like annulment or secession. This isn’t some sort of redneck revolt. It’s an opportunity for states to use the clear intent and language of the Constitution to rein in the federal government and put the republic on a more sustainable course.

Unquestionably, the Compact for America would represent change and innovation on a scale many may find unsettling. But this is our challenge. Are we, the political descendants of founders who risked everything to create the most free and prosperous government in the history of the planet, now so timid that we are afraid to use the tools they gave us to defend ourselves from tyranny and decay?

The risk larger than the Compact is the continuation of politics as usual. If we continue doing the same thing, it’s highly probable we’ll get the same results.

Our present predicament was anticipated by the founders. It is precisely the reason they gave the states the power to amend the Constitution. They would very much urge us to use it.

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Tom’s previous ANJ Commentary: “Look behind the Obamacare Curtain”

Captain Rick: The U.S. Senate gave its approval to raise the nation’s debt ceiling to $17.2 Trillion, allowing the government to continue spending like ‘drunkards’ by borrowing more money to pay its bills through March 2015.

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The politically charged issue cleared the chamber 55-43 after winning House approval Tuesday. The measure now goes to ‘debt loving’ President Barack Obama for his guaranteed signature. Approval removes the prospect of another protracted political fight over fiscal policy as Democrats and Republicans gear up for November’s midterm elections. How politically convenient is this?
It was a ‘clean’ bill…meaning there were no strings attached that would mandate new spending cuts. It gives approval to continue spending like ‘there is no tomorrow’. Our representatives in DC have kicked America’s ‘debt can’ down the road again for the N’th time. How much farther can it be kicked? I suspect…not much.

I wonder with dismay as to how Americans can stand for this total disregard of fiscal common sense? How can Americans continue to elect such fiscally reckless representatives to the U.S. Legislature. I see this tragic event bringing America one step closer to the edge of the real ‘fiscal cliff’. At the bottom…I envision America as a ‘third world country.’

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President Obama

Captain Rick: Obama’s 2014 ‘State of the Union struck a new low among my unbroken record of watching every one since 1960. Obama’s meaningless hype, wishful thinking and the constant bobbing of his head from side to side to view the teleprompters…looking like he was watching a tennis match…almost hypnotized me. It was a nice try on his part…but it just put me to sleep. 

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Credits: Thanks Ken of California for contributing the above graphic

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President Obama

Captain Rick: The Budget Act of 2013 kicks the ‘U.S. Debt Can’ down the road yet again. Passed by the U.S. House and expected to be passed by the U.S. Senate next week, I sense renewed concern for the fiscal demise of America. This act does not stop Americas insatiable thirst for debt spending. Debt will continue to rise at a reckless pace. The U.S. debt ceiling will again be reached in February 2014. I would wager it will again be raised. I would also wager that America’s train will plunge over the real fiscal cliff in the coming years. At the bottom lies America as a third world nation. The frustration I feel is well summed up by Matt Salmon, my Arizona representative in the U.S. Congress. Matt is a person that uses intelligence and wisdom to speak and vote … a very rare find in Washington DC these days.

ATRIDIM NEWS JOURNAL Guest Report

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Salmon Statement on the Budget Act of 2013

Washington—Today, Rep. Matt Salmon (AZ-05) released the following statement on the Bipartisan Budget Act of 2013 (Amendment to H.J. Res. 59):

“I applaud Chairman Ryan and our Republican Budget Conferees for working under difficult circumstances to negotiate a compromise with Senate Democrats, and I appreciate that this deal offers some positive items, such as helping to bring back regular order for the appropriations process, approving the Transboundary Hydrocarbon Agreement, restoring badly needed resources for our military, and making small changes to some mandatory spending programs.

“However, for me and most of the constituents I have heard from in my district, this deal falls short of something I could support.

“Unfortunately, this deal fails to even make modest reforms to our nearly bankrupted entitlement programs and it, once again, increases government spending  in the short-term with only a promise to make spending cuts in the long-term.

“If we are not willing to make tough choices now, then how can we expect future Congresses to stop kicking the can down the road?

“This was a grand opportunity for our nation’s leaders to reform and preserve the fiscal longevity of our entitlement programs, and this deal does not rise to that challenge.

“Furthermore, I have never believed that Congress should raise taxes or increase fees to justify more government spending. Sadly, this deal does exactly this by raising fees on air travelers.

“As we move forward under these new spending caps, my hope is that Congress and President Obama will finally recognize that our fiscal problems are not solved by raising more revenue and increasing spending, but by cutting spending and addressing our biggest crisis – unsustainable entitlement spending.

“We must make do with less government or our children and grandchildren will pay the heavy price as we continue to see a skyrocketing debt and runaway government spending.

“We must make big strides in the direction of a smaller and more efficient government in order to get our country back on the right path.”

Rep. Matt Salmon (AZ-05) serves on the House Committee on Foreign Affairs as Chairman of the Subcommittee on the Western Hemisphere. He is also a member of the House Committee on Education and the Workforce.
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