Tag Archives: entitlements

Trapping Wild Pigs, by Jeff Thomas

How to trap and enslave a human. From Jeff Thomas at internationalman.com:

pigs

Most of us would like to assume that we’re smarter than pigs, but are we? Let’s have a look.

Pigs are pretty intelligent mammals, and forest-dwelling wild pigs are known to be especially wily.

However, there’s a traditional method for trapping them.

First, find a small clearing in the forest and put some corn on the ground.

After you leave, the pigs will find it. They’ll also return the next day to see if there’s more.

Replace the corn every day. Once they’ve become dependent on the free food, erect a section of fence down one side of the clearing. When they get used to the fence, they’ll begin to eat the corn again. Then you erect another side of the fence.

Continue until you have all four sides of the fence up, with a gate in the final side.

Then, when the pigs enter the pen to feed, you close the gate.

At first, the pigs will run around, trying to escape. But if you toss in more corn, they’ll eventually calm down and go back to eating.

You can then smile at the herd of pigs you’ve caught and say to yourself that this is why humans are smarter than pigs.

But unfortunately, that’s not always so.

In fact, the description above is the essence of trapping humans into collectivism.

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Debt and Deficits: They’re Unsustainable, by Bob Luddy

There’s a certainty to increasing debt and compounding interest: eventually they must end. Either the debt is repaid or repudiated. From Bob Luddy at spectator.org:

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The American Dream is Being Held Hostage, by Virginia Fidler

The American Dream isn’t being held hostage, it’s been mortgaged. From Virginia Fidler at goldtelegraph.com:

For the first time in its history, the U.S. is seeing a budget deficit in excess of $1 trillion. And this deficit is expected to continue to grow. At a time when the U.S. economy is booming, the national debt is experiencing new heights, with no end in sight. A spiraling budget deficit will likely send inflation soaring. Never before has the U.S. deficit skidded out of control while the economy is in the midst of an upward swing. It is not a good sign.

President Trump favors tax cuts, while a large baby boomer generation is expecting its Medicare and Social Security benefits. Baby boomers started turning 65 in 2011, and the number of boomers retiring will grow to 35 million during the next three decades. The younger, working generation will only grow by 28 million, but will carry the burden of paying for the Social Security and health care benefits of the older generation. With boomers expected to live longer than previous generation, there will be a growing population expecting payments for a longer period of time. Social security and Medicare and other healthcare programs will are responsible for 100 percent increase in government spending with the exception of interest payment on the national debt. The burden of paying for these expenditures will fall on a generation that is seeing its American dream faltering before its eyes.

Are we facing a potential economic crisis?

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Obama On Pace To Increase The Debt By Stunning $2.4 Trillion This Year, by Simon Black

Obama’s legacies: regulation and debt. From Simon Black at sovereignman.com:

OK, this is pretty nuts.

According to data released by the Treasury Department yesterday, the US national debt has soared by a whopping $294 billion since the start of the 2017 fiscal year, just 45 days ago.

That’s an annualized increase of 13%.

So if they keep up this pace, the national debt will increase by $2.4 trillion this fiscal year, surpassing $21 trillion by next September.

It’s hard to believe how rapidly the debt is growing; debt growth is far outpacing the growth of the US economy… and there’s no way to pretend that this is good news.

That doesn’t stop leading economists from trying.

Nobel Laureate Paul Krugman says “debt is good” because the US economy has grown so much over the last 200 years despite not having been debt-free since 1835.

This kind of logic is astonishing.

Aside from a few anomalies like World War II and the American Civil War, debt levels over most of early American history were low.

100 years ago in 1916, US debt was about $3.6 billion; as a percentage of GDP (i.e. the size of the US economy), that was about 7%.

Today’s debt of $19,867,119,032,053.28 is actually bigger than the entire US economy at over 106% of GDP.

Yet in Krugman’s view, the fact that America prospered a century ago when the debt was 7% of GDP means that the nation will continue to prosper with a debt at 106% of GDP.

Amazingly enough, Krugman has been awarded our society’s most esteemed prize for intellectual achievement. It boggles the mind.

To be fair, there is such a thing as “good debt” versus “bad debt”, and it’s not difficult to distinguish between the two.

If you can borrow money at 5% in order to make a safe investment that has a 25% return, for example, that may very well qualify as “good debt”.

If you borrow money at 5%… or even 1%… and then squander the borrowed funds on useless trinkets, that’s clearly “bad debt”.

In 1803, the startup US government negotiated the Louisiana Purchase from France, a real estate acquisition that doubled the size of the US.

It was the mother of all distress sales. France was desperate for cash, and the administration of Thomas Jefferson negotiated a price that valued the land at around $15 million.

Adjusted for inflation to 2016 dollars, Thomas Jefferson paid about 40 cents per acre to acquire the land that comprises fifteen states and has generated trillions in economic activity.

Naturally the US government had to borrow money that year to conclude the Louisiana Purchase with France, so the national debt increased slightly in 1804.

But when you consider the extraordinary economic benefit of that purchase, it clearly qualifies as “good debt”.

Fast-forward to our modern era and we see that the debt is increasing by more than a trillion dollars each year.

What are the good citizens of the United States receiving in exchange for taking on so much debt?

It’s not like the government bought up half of Mexico or colonized Mars.

No, instead they wasted $2 billion on the Obamacare website, most of which went to a company whose top executive just happens to be an old friend of Michelle Obama.

Today, the US government has to borrow money just to pay interest on the money it’s already borrowed. This is almost the textbook definition of bad debt…

In fact, the government now spends nearly all of its tax revenue just on mandatory entitlement programs like Social Security and Medicare, plus interest on the debt.

The real kicker is that Social Security and Medicare are massively underfunded and quickly running out of cash… so they’ll both require a major bailout (i.e. MORE debt).

To continue reading: Obama On Pace To Increase The Debt By Stunning $2.4 Trillion This Year

4 Year Proposition? – Next President Has To Contend With Obama’s Massive Debt Burden At “Epic Turning Point” by Tyler Durden

Exponential functions can be a real bitch, even when the exponent is only slightly greater than 1. The chart below tells the story. From Tyler Durden at zerohedge.com:

Whoever wins the 2016 presidential election tomorrow night could be in for a rough 4 years in the White House courtesy of the gigantic debt burden amassed by Obama over the previous 8 years. While an accommodative monetary policy, including seemingly unlimited treasury buying by the Fed and foreign governments, has suppressed the budget impact of Obama’s ballooning federal debt balance, as Ed Yardeni told Bloomberg, “one shudders to think what would happen if rates actually ever did go back to normal.”

“We’ve really got ourselves into a pickle here,” said Edward Yardeni, president of Yardeni Research Inc. in New York, who’s been following the bond market since the 1970s. “All these years we’ve been kicking the can down the road, and suddenly we’re seeing a brick wall.”

“There’s been so much borrowing going on that’s been enabled by extremely low interest rates, one shudders to think what would happen if rates actually ever did go back to normal,” Yardeni said. “The impact on the interest expense would be significant, and could really bring deficit concerns back to the fore.”

As a report published by the Congressional Budget Office today points out, nearly 60% of the federal budget is spent on entitlements and interest payments on public debt. While the public debt balance has increased every single year of Obama’s Presidency, declining rates have largely offset the budget impact.

Outlays for the three largest entitlement programs—Social Security, Medicare, and Medicaid—rose by $29 billion (or 3 percent), $27 billion (or 5 percent), and $19 billion (or 5 percent), respectively. Spending for Medicaid grew largely because of new enrollees added through expansions of coverage authorized by the Affordable Care Act. With that growth, Medicaid spending has risen by almost 40 percent in the past three years. Combined outlays for the three programs were equal to 48 percent of federal spending and 10.0 percent of GDP in 2016, the highest shares ever recorded.

Outlays for net interest on the public debt increased by $23 billion (or 9 percent), largely because of higher inflation in 2016. (Each month, to account for the effects of inflation, the Treasury adjusts the principal of Treasury inflation-protected securities, using the change in the consumer price index for all urban consumers that was recorded two months earlier.) Outlays also increased because debt and average interest rates were higher in fiscal year 2016 than in fiscal year 2015.

That said, rates will have to “normalize” at some point and the CBO expects that the “winner” of the 2016 presidential election will be the beneficiary of that normalization.

If the CBO’s forecast is accurate, then outlays for the interest payments on public debt alone could rise over $300 billion over the next 8 years which would be more than a 50% increase in the current budget deficit.

To continue reading: 4 Year Proposition? – Next President Has To Contend With Obama’s Massive Debt Burden At “Epic Turning Point”

Recipe for Collapse: Rising Military and Social Welfare Spending, by Charles Hugh Smith

From Charles Hugh Smith at oftwominds.com:

Leaders faced with unrest, rising demands and dwindling coffers always debauch their currency as the politically expedient “solution.”

Whatever you think of former Fed chair Alan Greenspan, he is one of the few public voices identifying runaway entitlement costs as a structural threat to the economy and nation. We can summarize Greenspan’s comments very succinctly: there is no free lunch. The more money that is siphoned off for entitlements, the less there is for investment needed to maintain productivity gains that are the foundation of future income generation: Greenspan: Worried About Inflation, Says “Entitlements Crowding Out Investment, Productivity is Dead” (via Mish)

Many people look to the rising costs of the U.S. military as the structural problem, and they have a point: there is no upper limit on military spending, and the demands (by the civilian leadership of the nation) on the services and the Pentagon’s demands for new weaponry are constantly pushing budgets higher.

But the truth is entitlement spending now dwarfs military spending: entitlements are more than $1.75 trillion, half of all Federal spending, while the Pentagon, VA, etc. costs around $700 billion annually.

We have a model for what happens when military and social welfare spending exceed the state’s resources to pay the rising costs: the state/empire collapses. The Western Roman Empire offers an excellent example of this dynamic.

To continue reading: Recipe for Collapse: Rising Military and Social Welfare Spending

The Coming Era of Financial Triage, by Charles Hugh Smith

Sometimes the truth is pretty simple. From Charles Hugh Smith at oftwominds.com:

Virtually every major program of every major nation-state is financially unsustainable going forward.

Though triage is typically used in a medical setting, we are entering an era when financial triage will increasingly be necessary on a household, enterprise and national level.

The term triage may have originated during the Napoleonic Wars from the work of Dominique Jean Larrey. The term was used further during World War I by French doctors treating the battlefield wounded at the aid stations behind the front. Those responsible for the removal of the wounded from a battlefield or their care afterwards would divide the victims into three categories:

Those who are likely to live, regardless of what care they receive

Those who are likely to die, regardless of what care they receive

Those for whom immediate care might make a positive difference in outcome.

Financial triage is the process of sorting financial expenses/ programs that are unsustainable and cannot be “reformed”, those that cannot be saved except with systemic reforms, and those that will survive if simply scaled back.

To continue reading: The Coming Era of Financial Triage

The Coming Age of Austerity, by Patrick Buchanan

Pat Buchanan does not have a degree in accounting, but you don’t need one to know that the US is heading towards fiscal disaster. From Buchanan at buchanan.org:

“Are the good times really over for good?” asked Merle Haggard in his 1982 lament.

Then, the good times weren’t over. In fact, they were coming back, with the Reagan recovery, the renewal of the American spirit and the end of a Cold War that had consumed so much of our lives.

Yet whoever wins today, it is hard to be sanguine about the future.

The demographic and economic realities do not permit it.

Consider. Between 1946 and 1964, 79 million babies were born — the largest, best-educated and most successful generation in our history. Bill Clinton and George W. Bush, both born in 1946, were in that first class of baby boomers.

The problem.

Assume that 75 million of these 79 million boomers survive to age 66. This means that from this year through 2030, an average of nearly 4 million boomers will be retiring every year. This translates into some 11,000 boomers becoming eligible for Medicare and Social Security every single day for the next 18 years.

Add in immigrants in that same age category and the fact that baby boomers live longer than the Greatest Generation or Silent Generation seniors, and you have an immense and unavoidable increase coming in expenditures for our largest entitlement programs.

Benefits will have to be curbed or cut and payroll taxes will have to rise, especially for Medicare, to make good on our promises to seniors.

As for the rest of our federal budget of nearly $4 trillion, we have run four consecutive deficits of over $1 trillion. To bring that budget to balance, freezes would have to be imposed and cuts made in spending for defense and other social programs.

From California to Wisconsin to New York, we see the process at work at the state level. Government salaries are frozen, government payrolls are cut, government pensions and programs are scaled back.

California and Illinois are on the precipice of default. Cities like Detroit, Birmingham, Stockton and San Bernardino are already there.

As for national defense, how long can we afford to spend more than the 10 other top nations combined? How long can we continue to defend scores of nations half a world away? How many more trillion-dollar wars like Iraq and Afghanistan can we fight on borrowed money?

To continue reading: The Coming Age of Austerity

American Exceptionalism and the Entitlement State, by Nicholas Eberstadt

This long article from Nicholas Eberstadt at nationalaffairs.com is better skimmed than read. Although Mr. Eberstadt is badly in need of a more ruthless editor, the article is a good take on the entitlement state, and the American populace’s growing dependence on the government. From the one-graph-is-worth-a-thousand-words file:

http://www.nationalaffairs.com/publications/detail/american-exceptionalism-and-the-entitlement-state

For the graph and article: American Exceptionalism and the Entitlement State