Downsizing America
...Ongoing annual budget shortfalls in the trillions of dollars will, by 2019, cause publicly held federal debt to exceed 100% of the gross domestic product. Together with all the trillions of dollars in unfunded liabilities, the United States will be, in essence, a bankrupt nation.
Deficit spending (program expenses exceeding dedicated revenue) began on Medicare (2008) and Social Security (2010). Social Security cash surpluses, which have been used to help finance other government activity, will no longer be available to supplement the rest of the federal budget. By 2019, these programs will require at least $160 to $200 billion a year in borrowing to keep up with promised benefits.
As a result of all the massive borrowing, the annual interest liability by 2019 will approach $900 billion annually. (2009: $187 billion.) Within nine years, spending on Medicare, Social Security, and interest will account for 97% of all federal revenue.
The quick and glib answer to all this is to reduce spending to cover the deficit expenditures. However, total spending between 2010 and 2019 will be $8.5 trillion (27%) more than revenues. Will the majority of the public stand for reducing a monthly social security check by 27% or cutting Medicare reimbursements, defense spending, welfare, and unemployment, et al by a similar 27%?...
..However, the Obama administration's solution is to focus solely on raising taxes while proposing ever-expanding government spending. Beyond allowing the Bush tax cuts to expire in 2011, the double-edged purpose of the Cap-and-Trade, Health Care Reform, and Financial Reform bills is to raise taxes and fees while furthering government interference into the day-to-day lives of all Americans. The end result of the current policy by this White House and the Democrats in Congress will be to stifle economic activity, further reducing revenues to the government and exacerbating the very real possibility of national bankruptcy...
...This is now a true global market in which the United States must be competitive. The ideal of a world economy is now a reality. Countries such as China and India have begun to develop a middle class and raise the overall standard of living for their populations. In order to compete and continue this growth, these nations must attract intellectual and investment capital to their shores. They can do so with lower taxes, fewer regulations, a benign legal environment, and lower labor costs.
Thanks to new technology and global communication, major financial firms and their activities can now headquarter in Shanghai, Singapore, or Dubai rather than New York and still serve their worldwide clients. Manufacturing companies can seek out the country with the most advantageous business factors and get their products to a global market as a result of the enormous advances in shipping capacities.
With the rise of the middle class in these once-third-world countries, the populace is better-educated and technologically savvy. Research and development, a United States strength, will accelerate its shift overseas...
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The consensus of economic forecasters reveals what may be an overly optimistic average GDP growth rate of 3.1% for the years 2010 to 2015. However, spending by government at all levels (federal, state, and local) will increase an average of 6% per year during this same period, resulting in government spending, for the first time since World War II, being 50% of GDP.