Since raising the debt ceiling is all over the news let’s cut through all the bull and look at the reality of America’s debt. Raising the debt ceiling won’t in anyway stop the coming economic collapse, in fact it makes it more likely. The debt ceiling really has no reason to even exist since whatever government spends is decided by Congress anyway. The debt ceiling is just a political football that the two parties use against each other every so often to try to force the agenda of the ruling party.
The debt ceiling is not the problem, our present national debt and our future national debt is the problem. The majority Republicans in the House of Representatives wanted to use the debt ceiling to force government to live within its means before the American government bankrupts America and causes an economic collapse. That House effort to cap future spending and actually balance the budget failed in the Democrat controlled Senate because the political establishment that controls the Senate is not willing to make cuts in social programs and entitlements but instead wants higher taxes.
The politicians are now talking about reducing projected debt $1 to 3 trillion over 10 years but even the claim of making small cuts like that are not likely to actually happen. The cuts would only happen if all future congresses did not block the cuts and we do not have another economic downturn in the next decade and there are not any new wars. If all that unlikelihood actually took place, then these cuts could be made, but the figures they use when they tally the projected cuts do not reflect reality either.
In their projections over the next ten years for revenues and spending they use figures that come from the Twilight Zone. For example, they project that for the next ten years revenues and spending would increase for the next ten years at a rate of seven percent a year?? That figure is just plain nuts unless they are actually expecting to get over half of that 7 percent increase each year through inflation. If that is the case, it is still silly because government costs would also increase with inflation. So they would still have to cut government programs that time-and-again we see that they are not willing to cut.
Also, using their very own figures we should be able to see that the projected cuts would not really happen. As soon as inflation gets to the 3 percent inflation rate that they will be shooting for to achieve that seven percent revenue increase, interest rates on the national debt would also increase to 2 percent above the inflation rate, or to 5 percent. So all the cuts in the debt that they projected to make over the next ten years will be totally offset by the higher costs of borrowing. They do not use that fact in their projection figures.
Let me explain this further. The US Government says that inflation for the last couple of years has been running at 1 or 2 percent. Because of this very low inflation rate, the Treasury is only paying about 3 percent interest on its national debt. Now if we do the math on the 15 trillion national debt – ($15 trillion x .03 = $450 billion) – we get the interest payment this year. However, if inflation becomes the 3 percent projected to meet their 7 percent unadjusted for inflation growth target, the average interest rate on the national debt would soon climb to at least five percent. At 5 percent – ($15 trillion x .05 = $750 billion) – it will cost us $300 billion more a year than we are paying. So, in ten years that would add up to an additional 3 trillion dollars. Therefore, the $1 to $3 trillion in cuts they claim they will make (but won’t) are wiped out by the increased cost of borrowing by just using their very own inflation and growth figures and they never mention that fact.
So there are no real cuts in the national debt coming down the line. And the story still gets worse, because there also will not be the 3 or 4 percent real growth each year over the next ten years like they project. The growth over the last few years of this “recovery” has been about 2 percent and that is with the trillions in stimulus and money creation. With all the new government regulations and projected new taxes and the jobs that have gone elsewhere the economy is not going to grow at the historic rate; it might not even grow at all. Further, with the weakening of the dollar through quantitative easing, inflation will be much higher than they forecast unless there is another recession, but if there is another recession, every single projection that they made for the next ten years instantly goes up in the smoke because the tax revenues will fall.
So let’s get real here. Unless a balanced budget amendment to the Constitution is passed by 2013 the following will be the reality ten years down the line (If we could even make it that far without a default and economic collapse). The reality is that we will continue to spend at least 30 or 40 percent more than what we take in. Using today’s dollars and our 1.5 billion shortfall each year, that means that in ten years there will be another $15 trillion added to the $15 trillion debt that we already have. That means that by 2022, in today’s dollars, our national debt will be about $30 trillion. Using that same 5 percent unrealistically low interest rate for 2022, we will have an interest payment that year of $1.5 trillion (in today’s dollars). That would mean that in 2022 well over half of the total revenues collected will be used to just pay the interest on our national debt.
But, hold on it gets even worse. Those figures are based on the unrealistic optimistic assumptions that there will not be another war in those ten years or any economic downturn in those ten years. It also assumes that countries will continue to lend to us at a five percent interest rate when they know that there is a high likelihood that America will default.
Here is one reality that you can bank on. If interest rates any time in the next ten years spike to about ten percent we will have an economic collapse in fairly short order. Here is some food for thought. Under Jimmy Carter interest rates went up to 20 percent and during those days the Fed was not even creating new money and inflating the currency like they have been.
Those that rate US Treasury Bonds have flat out told us that if real spending cuts are not greater than $4 trillion dollars over the next ten years they will downgrade our AAA credit rating. Those spending cuts are not being made so it is very likely that our bond rating will fall within months. When it does, interest rates on our bonds will go up instantly. Interest rates will go up in any case because they can only be kept artificially low for so long. Those making investments in our bonds will demand higher returns as the dollar deflates through inflation and they also will demand a premium for the possibility of losing their money through the possibility of a default.
Even Liberals agree that the amount we are spending over our revenues is not sustainable but the difference between Conservatives and Liberals is how we get back down to a sustainable level. Liberals want to raise taxes and just cut defense and Conservatives do not want to raise taxes and they want to cut many domestic government programs.
The problem with raising taxes is that higher taxes cut production. Then revenues fall, so higher taxes at some level become self defeating. Also, massively cutting defense in this insane world is short-sighted. Liberals expect to realize some idealist world in the future but the world has never conformed to such Utopian idealism. Throughout history we get hit with the reality that there is evil on the earth and wars, so we do need a strong defense. That reality is not going to change before the second coming, so radical cuts in self defense are suicidal.
Knowing all these economic realities, it becomes obvious that the people of the United States must force government to live within their means, since most politicians are just out to please constituents that are never satisfied. Therefore, the only way to get government to live within its means is through a balanced budget amendment to our Constitution. In conjunction we also need a bill that will not allow any increase in taxes without a super-majority vote in both houses of Congress. If that does not happen they will just raise taxes, and thus they will create a contraction leading to less and less revenue, and higher and higher taxes, until the military coup d’état takes America over.
Such a balanced budget amendment and cap bill actually was recently passed by the House of Representatives but it did not get through the Senate. For it to get through the Senate and get to the States for ratification there will have to be at least 10 new Conservative votes in the Senate (The President is not in the loop for a constitutional amendment so he cannot veto it). It is not likely that the Democrats will change their position so that means that ten Conservative Republicans will need to be elected in 2012 for this legislation to pass the Senate. Only a third of the 100 Senators will be up for reelection in 2012, so getting ten additional Conservatives in the Senate in 2012 is a very tall order. It is not likely to happen.
It takes 60 votes for a filibuster proof majority in the Senate and with the Liberal states there is little reason to think Conservatives will ever get that many votes in the Senate. If they do it probably could not occur before the 2014 election when another third of the Senators come up for reelection. That means we could not even get this amendment to the Constitution to the States to ratify until 2015. Then it would take another year or two for that ratification to happen and it probably could not go into law until 2017. Even then the balancing of the budget would have to be phased in over a number of years.
Unfortunately by the time a balanced budget amendment became reality it would already be too late to save this nation from the coming economic collapse. Even if we could balance the budget right now it would require cutting government spending by forty percent. How can so much money be taken out of the economy without producing an economic collapse and massive riots? So I am sorry to tell you that I do not see any salvation coming to prevent this coming economic collapse. Getting our spending under control is just not going to happen. Therefore, this nation will be in default or in hyperinflation within the decade. Sorry, but the last train already left the station and your representatives in Washington missed it.
Having said that, with a different administration, there is a very small chance that we could move to an entirely different consumption tax system and also cut costs by completely pulling out of the world and cut whole government agencies. That would take the creation of a new political party or completely taking over the Republican party by electing only Conservatives. But, how do you even get a majority Conservative party like that elected when all the populous cities of our nation are filled with Liberals and dependents of government?
There would have to be a radical change in thinking across-the-board for this nation to survive this inevitable coming economic collapse. I just do not see that happening – at least not before the next civil war.
Don Koenig founded www.thepropheticyears.com website in 1999 after almost thirty years of independent study on the Bible and learning from many astute teachers within Christendom. Don created his website to write about Bible prophecy, biblical discernment and his Christian worldviews. Don wrote a free Revelation commentary ebook in 2004 named "The Revelation of Jesus Christ Through The Ages". The World and Church and Bible Prophecy section of this website was started in 2007.