Amid the discussions of the debt, we sometimes forget that the retirement of the Baby Boomers complicates things in part because it means that the "trust funds" will start selling, rather than buying T-bills, John Steele Gordon notes:
By far the biggest holder of federal treasury bonds is the United States Government itself ($4.2 trillion worth, as compared to $2.7 trillion held by foreigners). Most of this debt is owned by various trust funds, principally the Social Security Trust Fund. That makes the total national debt $10.5 trillion, not $6.3 trillion, 73 percent of GDP, not 40 percent.The big problem here is that many of these trust funds will have to start dipping into their stockpiles of treasuries in order to pay their obligations in the near future. Medicare is already doing so. Social Security will begin in 2016 according to current projections, as the tide of retiring baby boomers swells.
When the trust funds need the money, they will take their treasury bonds to the Treasury and ask for it. The government will then have three means for raising the money: 1) It can make cuts in spending in other areas of the federal budget (but not to the ever-growing portion that will have to be allocated to interest on the debt, a constitutional obligation). 2) It can raise taxes substantially to bring in new revenue. Or 3) It can go into the bond market and sell still more bonds over and above the trillions of dollars’ worth it will be selling in order to finance the Obama deficits.
Without a drastic change the dollar is dead. Choice three is always the choice, but a lot of the bonds will just get bought by the federal reserve system who will simply create the money to buy them. What you described is the high tech way of cutting coins. Mabye this should shed some light on what exactly they mean by streamlinging the economy and sustainable future. The only way the government could ever pay for all its obligations is if over half the country dropped dead.
One way to change would be to support HR 1207.
Inflation is not a solution to the Social Security financing problem because benefits are indexed to inflation. Nor is cutting Social Security benefits politically feasible. Increasing taxes on the upper middle class beyond what Obama is already proposing to do is economic suicide. The Obama deficits will make it impossible to finance the draw down of the trust funds in the financial markets. What's left is large consumption taxes that would work much like VAT - possibly an excise tax on carbon emissions.
The path we are on will impoverish the middle class with the possible exception of people working in the public sector.
Obama is also on a path designed to make his socialist transformation of America permanent - but that's another story.
Anyone buying into the suckers rally of the stock market....get out. If you can follow all of this stuff and you stay in then you deserve to loose your life savings. At least having some cash is better than nothing, buy gold if possible.
I have to say, I'm impressed by the creativity of the spammers in getting their stuff posted here. I find the commenting system hard anough to get through, and they somehow automated it.
(Unless this is Matt having more "entertainment".)