I cannot deny being a flummoxed by the inertia of our behemoth economy. It shrugs off problems like the housing slowdown and marches on. The deficit balloons and no lightning strikes.
The president claims that his $2.57 trillion budget is the first step on the road to fulfilling his campaign promise to halve the deficit by 2009, even if Congress agrees to make his tax cuts permanent and enacts still more reductions. That claim is completely unfounded. Indeed, if the White House team that drafted this budget were subject to Sarbanes-Oxley, criminal indictments would be flying.
Start with the fact that most of the spending reductions the president proposes will be rejected by Congress. The budget calls for the elimination or curtailment of some 150 programs. But last year the president proposed eliminating 65 programs for a savings of $4.8 billion--and Congress agreed to eliminate only four programs for a savings of less than $200 million. Although Congress is under some pressure to keep spending down, it is under even more pressure from the farm lobby, the business lobby, the veterans' lobby, the poverty lobby, and the oldies' lobby, to mention only a few groups that will fight Bush's cuts. [More]
This has been a bad time for doomsayers.
Nonetheless, I feel like saying some doom. And I'm not alone.
Modern accounting requires that corporations, state governments and local governments count expenses immediately when a transaction occurs, even if the payment will be made later.
The federal government does not follow the rule, so promises for Social Security and Medicare don't show up when the government reports its financial condition.
Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.
Unfunded promises made for Medicare, Social Security and federal retirement programs account for 85% of taxpayer liabilities. State and local government retirement plans account for much of the rest. [More]
One thing I have noticed during my life is how long it takes for the trees to fall. Even after the final through-cut is made, a large tree will remain upright, only slowly developing the momentum that hurls it to earth. I have witnessed this same phenomenon as farmers who farmed badly took decades to exit, despite doing everything wrong at every chance.
We Boomers may pull off the last great generational robbery as we suck resources from future generations aided by fictitious accounting illustrated above.
Not a great epitaph.