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Struggle4Bucks · 08-19-2013, 07:03 AM

Maybe it's not a "people don't want to pay for porn anymore"-problem. Maybe it's an "increasing amount of people that have less and less to spend every month"-problem.
If you think this crisis will soon be over... think again... it has yet to begin... Things will get very very nasty... What we experienced the last few years is peanuts compared to what is coming.

The Great Default: Why Taxpayers Cannot Grow Their Way Out of the Government's Problem
Gary North - August 17, 2013

In assessing whether or not the United States government will be able to maintain Medicare, Social Security, and Medicaid payments to all of the people who have been promised such payments, we must assess the ability of the federal government to collect sufficient revenues to make these payments.A standard suggestion by liberals, who deeply believe in these programs, is to say that what needs to be estimated is the Gross Domestic Product of the entire nation. Then, once this is estimated, it becomes possible to determine whether or not the federal government will be able to make the payments. Here is a recent example.

A fundamental problem with this approach is this: it assumes that the United States government has a legal claim on 100% of the productivity of the residents of the United States. This is politically naïve. We know from experience that the limit of the federal government's ability to collect revenues is somewhere in the range of 20% of GDP. It never exceeds this by much. It has not exceeded it since World War II, and it has never reached 21%. So, while it is instructive to look at what GDP is likely to be, there has to be a limit on the possibility of the federal government's extracting sufficient revenues to maintain its payments.

The next step is to assess what percentage of the federal budget can be allocated to maintaining these payments. One thing is certain: it is not 100%. The federal government has other responsibilities, and any attempt to cut back on any expenditures will be fought tooth and nail by organized groups that have a stake in the subsidies. Furthermore, there will be infighting within the federal bureaucracy as a matter of turf protection. Any attempt by the Social Security Administration to extract wealth, meaning budgetary allocations, from any of these rival federal bureaucracies will lead to a political standoff.

So, from the beginning, we must assume the following. First, it is unlikely that the federal government will be able to collect more than 20% of GDP from the public. Second, it is unlikely that Social Security, Medicare, and Medicaid will ever exceed 60% of the federal budget. It is around 50% today. There is too much political power lodged in other special-interest groups, which are represented by the bureaucracies within the federal government. These people will not give up without a series of political fights.

It is now highly unlikely that the economy of the United States in real terms will exceed an annual increase as high as 3% per annum. The GDP of the United States is around $17 trillion today. Multiply this by about 20%, or .2. That is about $3.5 trillion. At present, the government pulls in only about $2.5 trillion. It borrows the rest. Multiply this by .6: 60% of the budget. That is about $1.5 trillion. That is about the maximum that the government can expect to spend on the major items of the unfunded liabilities.

There is no way that an increase of 3% per annum to this figure of $1.5 trillion will enable the United States government to pay its obligations for Social Security, Medicare, and Medicaid. Kotlikoff estimated the present value of the unfunded liabilities in 2012 as $222 trillion. I know of no estimate that places this lower than about $70 trillion. Note: these are unfunded liabilities, not total expenditures on the programs.

There is no way statistically that this can be paid off. Liberals can dance around the figures, and pretend that "we" are going to grow our way out of this. We are not going to grow our way out of this. The government is going to default its way out of this.

It is indicative of the complete bankruptcy of the present political order that no national leader will face up publicly to these facts. This is true throughout the Western world. Back in 1999, Peter G. Peterson wrote in his book, Gray Dawn, that he had discussed this matter with political leaders around the world. He said that not one of them was unfamiliar with it, and he also said that not one of them had spoken publicly about it. Peterson was the chairman of the Council on Foreign Relations. He had access to these leaders. He was in a position to know what they believed. He was also in a position to know what they had done. What they believed had nothing to do with what they had done.

There is going to be a Great Default. There is no escape from this. People can prepare for it, or they can ignore it, but statistical games will not enable the United States government to do anything except default.

08-19-2013, 07:03 AM
Struggle4Bucks Sieg Hi! Industry Role: Join Date: May 2011 Location: Lissabon Posts: 3,614	Maybe it's not a "people don't want to pay for porn anymore"-problem. Maybe it's an "increasing amount of people that have less and less to spend every month"-problem. If you think this crisis will soon be over... think again... it has yet to begin... Things will get very very nasty... What we experienced the last few years is peanuts compared to what is coming. The Great Default: Why Taxpayers Cannot Grow Their Way Out of the Government's Problem Gary North - August 17, 2013 In assessing whether or not the United States government will be able to maintain Medicare, Social Security, and Medicaid payments to all of the people who have been promised such payments, we must assess the ability of the federal government to collect sufficient revenues to make these payments.A standard suggestion by liberals, who deeply believe in these programs, is to say that what needs to be estimated is the Gross Domestic Product of the entire nation. Then, once this is estimated, it becomes possible to determine whether or not the federal government will be able to make the payments. Here is a recent example. A fundamental problem with this approach is this: it assumes that the United States government has a legal claim on 100% of the productivity of the residents of the United States. This is politically naïve. We know from experience that the limit of the federal government's ability to collect revenues is somewhere in the range of 20% of GDP. It never exceeds this by much. It has not exceeded it since World War II, and it has never reached 21%. So, while it is instructive to look at what GDP is likely to be, there has to be a limit on the possibility of the federal government's extracting sufficient revenues to maintain its payments. The next step is to assess what percentage of the federal budget can be allocated to maintaining these payments. One thing is certain: it is not 100%. The federal government has other responsibilities, and any attempt to cut back on any expenditures will be fought tooth and nail by organized groups that have a stake in the subsidies. Furthermore, there will be infighting within the federal bureaucracy as a matter of turf protection. Any attempt by the Social Security Administration to extract wealth, meaning budgetary allocations, from any of these rival federal bureaucracies will lead to a political standoff. So, from the beginning, we must assume the following. First, it is unlikely that the federal government will be able to collect more than 20% of GDP from the public. Second, it is unlikely that Social Security, Medicare, and Medicaid will ever exceed 60% of the federal budget. It is around 50% today. There is too much political power lodged in other special-interest groups, which are represented by the bureaucracies within the federal government. These people will not give up without a series of political fights. It is now highly unlikely that the economy of the United States in real terms will exceed an annual increase as high as 3% per annum. The GDP of the United States is around $17 trillion today. Multiply this by about 20%, or .2. That is about $3.5 trillion. At present, the government pulls in only about $2.5 trillion. It borrows the rest. Multiply this by .6: 60% of the budget. That is about $1.5 trillion. That is about the maximum that the government can expect to spend on the major items of the unfunded liabilities. There is no way that an increase of 3% per annum to this figure of $1.5 trillion will enable the United States government to pay its obligations for Social Security, Medicare, and Medicaid. Kotlikoff estimated the present value of the unfunded liabilities in 2012 as $222 trillion. I know of no estimate that places this lower than about $70 trillion. Note: these are unfunded liabilities, not total expenditures on the programs. There is no way statistically that this can be paid off. Liberals can dance around the figures, and pretend that "we" are going to grow our way out of this. We are not going to grow our way out of this. The government is going to default its way out of this. It is indicative of the complete bankruptcy of the present political order that no national leader will face up publicly to these facts. This is true throughout the Western world. Back in 1999, Peter G. Peterson wrote in his book, Gray Dawn, that he had discussed this matter with political leaders around the world. He said that not one of them was unfamiliar with it, and he also said that not one of them had spoken publicly about it. Peterson was the chairman of the Council on Foreign Relations. He had access to these leaders. He was in a position to know what they believed. He was also in a position to know what they had done. What they believed had nothing to do with what they had done. There is going to be a Great Default. There is no escape from this. People can prepare for it, or they can ignore it, but statistical games will not enable the United States government to do anything except default. __________________ Half troll half amazing!