The Federal Government is BANKRUPT

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The Federal Government is completely bankrupt. They cannot honor all of their financial obligations.

Let me help the reader understand.

Let’s say I started a company, and as part of the compensation package for the employees, I promised them a nice fat pension check. After going through all the traditional accounting, namely, income, expenses, etc…, how would you tell if my company were making money or losing money?

What you have to do is figure out how much money I need to have today to meet my future obligations. You would need to add this under the “debt” column because it is money we promised to pay.

If the company ever got to the point where it was uncertain whether we could meet all of our pension promises, the company would be under a moral obligation to disclose this to their future pensioners, investors, and debtors. The reason why is because they all have claim on the money and assets that make up the company. If the company can’t meet all of its financial requirements, then the company needs to tell some of its debtors that it can not pay as soon as possible.

Pension checks are notoriously difficult to estimate how much you need on hand today. The same cash invested at different times in our history in different vehicles could render massive gains or losses. Even conservatively investing the money could give you returns in a ballpark. Knowing what your return will be is important, unless you plan to sit on the money and do nothing with it except collect interest from the government. That’s why I never, ever count on pensions from any company, no matter how stable they are. You simply can’t promise that it will be there when I retire, no matter what you do.

When you factor in inflation, and changes to the cost of living, it’s questionable what value a fixed income would be in the future anyway. I’d rather take cash today than promises in the future.

The federal government unwisely promised to take care of our senior citizens. The programs of Social Security and Medicare, today, require huge cash disbursements. The income from both of these programs is not enough to cover today’s expenses. That means we are taxing to pay off these programs. That’s not surprising: the cash surplus was loaned to the federal government’s general budget, and the taxpayers are on the hook to pay back those loans with interest. The fact that the taxpayers and the retirees are one and the same seems to bother no one. It’s entirely foreseeable that, at best, you get $200 in the mail, turn around and pay it to the government in taxes, which is just enough to get next month’s $200 check.

When the federal government reports a deficit of $1.3 trillion, they are talking only about cash flow. This is only a small part of the bigger picture. See, nowhere is the increase or decrease in future obligations addressed. In reality, Social Security and Medicare have been losing solvency over the past few years. This is a combination of a decreased income supply and inflation. Both of these mean we need even more money today if we are to meet our future obligations.

The “real” deficit, the deficit any publicly-traded legally compliant corporation would have to report, is $5.0 trillion. That’s for 2011 alone. That’s a scary number, when you consider the GDP, the gross income, the total manufactured wealth in this country, is only about $15 trillion. We’ve already obligated ourselves to pay 1/3 of everything every created and produced in this country. It is not our money to spend.

This is only the change over time. 2010 saw $5.6 trillion in real deficit. This is a disaster if it happened in one year, but it’s happening every year!

In reality, people really don’t know what we really have promised to pay as a federal government. No one can say with certainty how much cash we need to have on hand today to satisfy all of our future obligations for all time. Some estimates I have seen put our total debt at well over $200 trillion, which is so much money that it’s impossible to think of where it could possibly come from.

The bottom line is that the federal government cannot pay its obligations. We are already bankrupt, but refuse to admit it to ourselves. We are the family who live in a house they can’t afford, on an income that can’t even cover their annual spending. We promise to pay people money that we will never, ever have, and we continue as if nothing is wrong. Our financial house is already in ruins, and we are already toast.

Social Security? Medicare? They don’t exist. What we have are shams. If you are able to get a dime out of it, you are one of the lucky ones. Forget whatever you’ve been promised by these programs, you will not get it unless you are lucky and line up to receive your paycheck first.

Do you want to know what’s really scary? Congress and the budget offices have already told themselves that they will not honor Social Security and Medicare obligations. We are going to rewrite who gets what, and it’s probably already been largely decided. And at the same time, we’re telling our people that we haven’t done any such thing. We are lying to ourselves, and we feel proud about it.

I honestly shake my head in disgust. I want to vomit when I think about it. If I worked for a company that did this, I would quit and tell the world. I would welcome a lawsuit to shut me up, because it would bring truth to the world. I can think of nothing any corporation in the United States or world can do that can compare with the outright fraud, dishonesty, and lies that have been forced upon the American people since the introduction of the entitlement programs.

I’m glad that Washington State is out of the liquor business. It’s a filthy business I want nothing to do with. I detest alcohol and its effects and its addictiveness, and I wish no one would waste one moment of their time making it or consuming it. I tolerate other’s imbibing and manufacture of it only because I believe government force will not end the alcohol problem our nation has, but persuasion, kindness, and tolerance will.

I can’t wait until the federal government gets out of the financial fraud business. Here’s something I do believe the government should be actively involved in ending, something that is so morally and horribly wrong no one should tolerate it even for one minute.

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2 Responses to “The Federal Government is BANKRUPT”

  1. tensor Says:

    Here’s actual research on the matter, from a real financial reporting organization:

    After adjusting for inflation, spending under Obama is falling at a 1.4% annual pace — the first decline in real spending since the early 1970s, when Richard Nixon was retreating from the quagmire in Vietnam.

    In per capita terms, real spending will drop by nearly 5% from $11,450 per person in 2009 to $10,900 in 2013 (measured in 2009 dollars).

    Oh, and government is not a business, so none of your other points are valid, either. You’re welcome.

    • Jonathan Gardner Says:

      There once was a household who spent far more than they could earn. One year, they actually increased spending at a slower rate than the year before. Everyone got excited about the good news!

      For those of you who haven’t taken calculus yet, what Obama did is slowed the growth of government. Government is still growing, but it’s just growing at a slower accelerated pace. The first derivative of the government balance is still negative, the second derivative is still negative, even though the third derivative is slightly positive.

      Using physics as an analogy, we are a car speeding down the highway of debt in the wrong direction. We’re hurling down the freeway at ever increasing speeds, and Obama’s foot is on the gas pedal, pushing the pedal to the medal. We used to be going 80 a few moments ago. Now we’re going 100. Obama just lifted his foot off the accelerator a little bit, so now we’ll be going 110 instead of 120 in a few moments. The brick wall in front of the car is going to be slightly less lethal, thanks to Obama’s heroic act!

      It doesn’t sound so good anymore, does it?

      There is going to be a crash, a very, very bad one, unless we STOP the car, turn around, and come back to fiscal sanity. That would require ACTUAL SPENDING CUTS. That means, one year, the food stamp program gets LESS money than the year before, along with a whole lot of other things. That would mean FEWER PEOPLE LIVE AND WORK IN DC. Lifting your foot off the gas pedal by a little bit doesn’t get us where we need to be. We need to jam our foot on the brakes until spending doesn’t grow at ALL, then we start cutting until our spending and incurred obligations match EXACTLY what we take in. That means NO MORE BORROWING MONEY. Even then, we’re going to have to come back home by spending less than we collect, so that we can pay off the debt and so we don’t have one of the largest line items on our budget being interest to foreign banks.

      Maybe one day, we’ll actually stop spending more money than we take in. Maybe one day we’ll actually balance the books the same way everyone else has to, and no longer promise to spend more than we can expect to bring in. Maybe one day we’ll actually spend LESS than we take in, and take the rest and start paying off the enormous debt we have. And maybe, maybe, MAYBE one day we’ll actually come back to a country that has no debt at all, doesn’t borrow money to spend, and doesn’t rely on our children to pay off the things we enjoy today. Since we’re the most productive people on this planet, if we can’t do it, no one can. And if no modern government can survive within its means, then that means we can’t have modern governments without society collapsing every few decades.

      Of course, none of the above has anything to do with the fact that the government is still bankrupt. They cannot ever hope to pay off all their obligations. The only way they could pay their obligations is to give up on some of them or dramatically change them.

      Obama wants us to believe he’s the savior of the federal finances. This is hogwash. Everyone knows the TEA Party took over the house in 2010, and threatened to end increases to the debt ceiling. After the Obama administration and the democratic party had a veritable temper tantrum, they reached an agreement: No more deficit spending, and only a small increase in the debt ceiling. The senate democrats have ALREADY reneged on their promises. Barack Obama pretends like the deal never happened. Now that the debt ceiling needs to be raised again, Speaker Boehner has renewed his threat not to raise it.

      Obama was the one in the senate supporting the democratic party’s wild excesses ever since they took congress in’08. Obama was the one proposing endless spending sprees— a trillion here, a trillion there, and who cares? Obama is the one who used companies like Solyndra to launder federal government money into his reelection finances. And we’re supposed to believe Obama wants to actually cut the size of the government? Wow. Just, WOW.

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