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Monday, February 15, 2016

The Big Squeeze

by JASmius

Nothing of which many of us haven't been warning for the past twenty years.  The difference is....well, that we're twenty years closer to it - and vastly closer still, given the reckless degree to which Barack Obama has stomped on the fiscal "gas".

Think of this as an update as opposed to "breaking news":

How severe is the squeeze? The answer is in table S-7, buried in the back of the budget. Almost one-third of the federal budget consists of “discretionary spending,” which covers defense, courts, parks and all programs requiring annual congressional appropriations (essentially, permission to spend). Most of the rest of the budget goes to “mandatory” programs — Social Security is the biggest — for which people qualify if they meet eligibility requirements…

Over two-thirds of federal spending is entitlements.  I remember vividly when such a proportion was predicted in fiscal collapse endgame scenarios.  Now they're here.  The collapse can't be far behind:

From 2017 to 2026, Social Security spending rises 27%, Medicare is up 30% and Medicaid increases 24% (note: some Medicaid spending goes to the non-elderly).

Understand, folks, that all three are already bankrupt.  Double those percentages and we're "getting warm" in terms of what will actually transpire.

I used to say that the three core federal entitlement programs would go toes-up right as I reached age-eligibility (2029), because that was the general estimate....twenty years ago.  You can safely slice a decade off of that forecast now.

Meanwhile, defense spending falls 19%, and non-defense discretionary spending (the category that includes the courts, regulatory agencies, the national parks and much more) drops 16%.

Double the defense spending erasure and figure non-defense discretionary spending as increasing in proportion to entitlements.  We know how this really works, after all.

What Mr. Samuelson isn't mentioning is interest payments on the volcanic national debt. which will geyser when rates inevitably go up beyond the Fed's ability to control - say, after the dollar is removed as the global reserve currency - which is inevitable given the enormous degree to which the debt, which recently blew past $19 trillion, has been monetized.  When that happens, even entitlements spending will start getting crowded out.  You can extrapolate from there - public anger, the social unrest and upheaval, the political instability, the government crackdowns - with no country and nobody willing or able to bail us out.

Or defend us from our enemies, as the crowding out of defense spending will leave our military old, obsolete, and denuded, and our country functionally all but defenseless.  The only question will be which comes first, our collapse or our conquest.

Some discretionary programs will always, either for political reasons or genuine need, grow more rapidly than inflation and population. Cybersecurity is a present example. But they are the exceptions. Current policy is for most discretionary programs to do more with less — a formula for ultimate failure. The squeeze in any one year is small; the cumulative effect is huge.

The frog in the boiling pot.  Or, to put it in communist lingo, the Cloward-Piven effect.  And there's no escape from it, because, even assuming that averting disaster is possible - which it isn't - the steps necessary to do so - essentially the re-constitutionalization of America, reducing federal spending by 80%-90%, eliminating a like percentage of the federal government itself, while keeping tax revenues confiscatory in order to run the generation's worth of surpluses necessary to pay down the national debt - are politically impossible.

So that's it.  We can't pay off the debt, and it's vastly too big to economically grow our way out of, as we did during the Reagan golden age (and even then it took close to twenty years to even get to the point of running federal surpluses).  The only other possibility is a default that will implode the global economy and plunge the planet into a dark age of poverty, disease, and unchecked war....

....of which America will be the universal target.

To You-Know-Who's smug, nodding satisfaction.

You want hope and optimism?  Eliminate the mass Trump-fellating and then we can talk.

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