Free Markets, Free People

Economy

The New Jersey model

An interesting article in the Wall Street Journal about newly elected NJ governor Chis Christie.  The Republican, elected in a traditionally blue state, ran as if he’d be a one-termer and laid out the distasteful medicine necessary to put the state’s fiscal house in order.  To the surprise of many, he won.  He’s now engaged in doing what he said he’d do.

His assessment and conclusion are solid:

“We are, I think, the failed experiment in America—the best example of a failed experiment in America—on taxes and bigger government. Over the last eight years, New Jersey increased taxes and fees 115 times.”

And what has NJ gotten for that?

New Jersey’s residents now suffer under the nation’s highest tax burden. Yet the tax hikes haven’t come close to matching increases in spending. Mr. Christie recently introduced a $29.3 billion state budget to eliminate a projected $11 billion deficit for fiscal year 2011.

Obviously, as must be done in a state which has the nation’s highest tax burden, Christie has laid out a very aggressive plan that cuts spending to eliminate that deficit. And, as you might imagine, the entrenched interests which will see their budget’s cut are almost unanimous in their opposition. Most the opposition comes from government unions, and especially from New Jersey Education Association, the state’s teacher’s union.

And Christie is using a little of the left’s favorite tactics against them:

“I’m a product of public schools in New Jersey,” Mr. Christie explains, “and I have great admiration for people who commit their lives to teaching, but this isn’t about them. This is about a union president who makes $265,000 a year, and her executive director who makes $550,000 a year. This is about a union that has been used to getting its way every time. And they have intimidated governors for the last 30 years.”

Christie is obviously not going to be intimidated. And he’s got the numbers and, apparently, the public behind his effort to pare the educational establishment down to a manageable and affordable size:

While the state lost 121,000 jobs last year, education jobs in local school districts soared by more than 11,000. Over the past eight years, according to Mr. Christie, K-12 student enrollment has increased 3% while education jobs have risen by more than 16%. The governor believes cuts in aid to local schools in his budget could be entirely offset if existing teachers would forgo scheduled raises and agree to pay 1.5% of their medical insurance bill for one year, just as new state employees will be required to do every year. A new Rasmussen poll found that 65% of New Jersey voters agree with him about a one-year pay freeze for teachers.

The union, of course, has it’s own favored solution and I assume you can guess what it involves:

But the teachers union wants to close the budget gap by raising the income tax rate on individuals and small businesses making over $400,000 per year to 10.75% from its current 8.97%.

Obviously he has a lot of other fights within the state on his hands, such as cutting the onerous regulation regime the state has built, but he has a primary goal and desire to return the state to fiscal sanity. And he also knows that to do that he has to lower overall taxes – if he wants to again attract business and those who earn enough to provide a solid tax base.

The governor aims to move tax rates back to the glory days before 2004, when politicians lifted the top income tax rate to its current level of almost 9% from roughly 6%. Piled on top of the country’s highest property taxes, as well as sales and business income taxes, the increase brought the state to a tipping point where the affluent started to flee in droves. A Boston College study recently noted the outflow of wealthy people from the state in the period 2004-2008. The state has lately been in a vicious spiral of new taxes and fees to make up for the lost revenue, which in turn causes more high-income residents to leave, further reducing tax revenues.

So here’s a governor who understands that what has been heaped on the back of the taxpayers that are left is too much and is looking at other real ways of reducing the cost of government – i.e. actually seeking out where it has become bloated, putting some of the costs of the benefits government workers receive back on them, cutting unnecessary spending all with a goal of eliminating the deficit the state faces. And, by the way, planning on reducing the tax rate with an eye toward luring back the affluent and businesses with an eventual goal of actually increasing tax-revenues, and jobs, and all the other benefits such an influx would bring.

“What I hope it will do in the end is first and foremost fix New Jersey, and end this myth that you can’t take these people on,” he says. “I just hope it shows people who have similar ideas to mine that they can do it. You just have to stand up and grit your teeth and know your poll numbers are going to go down—and mine have—but you gotta grit it out because the alternative is unacceptable.” He also strongly believes that voters elected him specifically to fight this fight. “They’re fed up. They’ve had enough. In normal circumstances I wouldn’t win,” he says.

He’s probably right about that. He probably wouldn’t have won 3 or so years ago.  And he’s right that the voters, as his election demonstrates, are “fed up”.  But, once the cuts start to hit, nothing says Christie will be given the continued support necessary to accomplish his goals.  But he seems to be a man who is going to do all he can to accomplish them. I call it the New Jersey model because if successful, Gov. Christie will provide both the blueprint and the success story which small government/fiscally conservative types can point to when discussing what must -and can – be done at both a state and national level. I’ll be watching the NJ saga develop with great interest over the years, and wishing Gov. Christie the best of luck in attaining his goals.

~McQ

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Sure is quiet out there

I’m sure you’ve noticed the pattern – when unemployment figures show an increase in jobs, even a tiny one, administration figures can’t wait to find a microphone to announce that things are finally turning around.  When “unexpectedly” bad numbers show up, they want to talk about other things.  This happens to be one of those weeks:

In the week ending April 10, the advance figure for seasonally adjusted initial claims was 484,000, an increase of 24,000 from the previous week’s unrevised figure of 460,000. The 4-week moving average was 457,750, an increase of 7,500 from the previous week’s unrevised average of 450,250.

Now I’m not saying that’s abnormal or something only this administration does, but given the extent and duration of the unemployment situation, increases in the number of unemployed should be unexpected.  And while any increase in jobs is to be seen as a positive sign, until there are multiple months above the + 140,000 level, we aren’t adding any jobs.  That number is seen as what is necessary to maintain an employment rate percentage. So even to maintain a 9.7% unemployment percentage we need that monthly positive number to do so.  The point being, reports like the one above indicate we may see that 9.7% rate nudge upward soon.

Lastly, one of the reasons many experts expect this to be a jobless recovery is because of its length.  Companies who shed jobs over a year ago and have survived and may even be starting to thrive a bit are going to think very hard before they put more labor on.  If they’ve been able to function efficiently – i.e. if their productivity has increased (and thereby their profit) with a reduced staff, they’re very likely to maintain their staffing at present levels.  If they hire it won’t be until they absolutely have too (driven by a significant increase in business) but that could be months if not years away.

Certainly not a rosy picture.

~McQ

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Laying the groundwork for new taxes

There is no one out there that won’t agree that government has gotten us into a debt-ridden fiscal mess.  Note I said government, meaning both Republicans and Democrats.  And now, on a spending binge from hell, we’re starting to see how this particular administration plans to address the growing concern over the debt.  Given some choices  -cut spending, cut the size and cost of government or increase taxes – it appears it will choose the taxation route.  And Paul Volker is just one of many who will be making the case.  Reuters reports:

The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday.

Volcker, answering a question from the audience at a New York Historical Society event, said the value-added tax “was not as toxic an idea” as it has been in the past and also said a carbon or other energy-related tax may become necessary.

Though he acknowledged that both were still unpopular ideas, he said getting entitlement costs and the U.S. budget deficit under control may require such moves. “If at the end of the day we need to raise taxes, we should raise taxes,” he said.

Should we?  Or should we approach it from a different direction – such as the first two choices.  But the expansion of government is an ideological choice of the party in power.  Don’t believe it, check out this article about hiring.  The government is seeking to add 193,000 new jobs in the next two years.  So, uh, it’s up to you to pay off the deficit and get those entitlement costs under control.  And, of course, notice that Volker points to both a VAT and a tax like cap-and-trade as “necessary”.  Note too that neither tax is a direct income tax although both would directly and expensively impact income of all consumers by making virtually everything cost more.  However, the charade of “95% of you won’t see your taxes go up by a dime” will be maintained.

What voters need to do this November is make the Congressional races about the difference between the choices I’ve laid out.  And, unlike Volker’s conjecture, we need to make the VAT and cap-and-trade as electorally toxic as possible to those that support them while rewarding those who take the alternative approach.  There is no reason that increasing taxes should or must be the only solution to the unchecked profligacy of government.  Perhaps, instead, it is time to limit government’s ability to spend us into oblivion and put the people in office who can start that process rolling.

~McQ

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Government unions and politicians – an unaffordable mix

Yesterday I noted that Massachusetts is faced with figuring out how to handle the Cadillac tax among its government workers.   Many of the very expensive plans are found among municipal workers, most negotiated by government unions representing the workers.

There’s another ticking time bomb out there that isn’t getting the press it deserves which too can be laid at the feet of unions which represent government workers and gutless politicians who can’t say no with your money.  California provides a good example:

The state of California’s real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.

That’s the finding from a study released Monday by Stanford University’s public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.

To put that number in perspective, it’s almost seven times greater than all the outstanding voter-approved state general obligation bonds in California.

Those are the facts, stated simply.  It provides an example of absurd extravagance within the public sector and now a huge level of debt on those unfunded promises – and that’s what we’re talking about here – of $500 billion.  Where will California get the money, since these promises are contractual obligations and it can’t print money?

From, increased debt, cuts in other state services or increased taxes or all three, that’s where.  David Crane explains how the state ended up in this condition, using GM as an example:

How did we get here? The answer is simple: For decades — and without voter consent — state leaders have been issuing billions of dollars of debt in the form of unfunded pension and healthcare promises, then gaming accounting rules in order to understate the size of those promises.

As we saw during the recent financial crisis, hiding debt is not a new phenomenon. Indeed, General Motors did something similar to obscure the true cost of its retirement promises. Through aggressive accounting, for a while it, too, got away with making pension contributions that were a fraction of what it really needed to make, thereby reporting better earnings than was truly the case.

But eventually the pension promises come due, and for GM, that meant having to add extra costs to its cars, making its prices less attractive to consumers and contributing to its eventual bankruptcy.

Issue debt, spend the money, game the accounting system, look surprised when the obligations come due and blame your predecessors.  The new way in American politics.  As we saw with the charade of health care reform, it is alive and well and pumping out more unfunded entitlements as we speak.

But sticking with the case of California, Crane (who, btw, is a special adviser to the Governor on jobs and economic growth) gets to the heart of the matter, something I see more and more of:

Last summer Gov. Arnold Schwarzenegger proposed exactly that. Since then? Silence. State legislators are afraid even to utter the words “pension reform” for fear of alienating what has become — since passage of the Dills Act in 1978, which endowed state public employees with collective bargaining rights on top of their civil service protections — the single most politically influential constituency in our state: government employees.

Because legislators are unwilling to raise issues that might offend that constituency, they have effectively turned the peroration of Abraham Lincoln’s Gettysburg Address on its head: Instead of a government of the people, by the people and for the people, we have become a government of its employees, by its employees and for its employees.

This isn’t at all uncommon among state, local or the federal government.  And it is an ever increasing base – the one sector still hiring throughout the recession is government.  What Crane points out is a problem everywhere.  Pension funds, in many cases are underfunded.  Government employees have union negotiated benefits that are unaffordable given the current fiscal climate and are most likely unaffordable even in good economic times.  Gutless politicians, especially those who count on those public sector unions for support on election day, refuse to address and act on the problem.

And taxpayers?  Again, these are contractual obligations – if the money’s not there, it has to come from somewhere.  Any guesses who ends up holding the bag?

If public service is about serving the public, my guess is the public is going to want to know why their servants make more than they do and have better benefits as well?  The answer is found under the roof of your state legislature where politicians use your money, as well as obligating you to future debt, to buy the support of the government unions.

Heck of a scam if you can pull it off, huh?  And to this point, they have.

~McQ

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Chart of the day – debt controlled by foreign governments

There’s been a lot of discussion about how much of our debt is controlled by foreign governments.  The answer is found in this chart.  In short a lot (more than half) and growing.


The significance?  A sort of unacknowledged elephant in the room:

While the ownership of our debt may be theoretically neutral, there is a case to be made that this debt reliance gives significant bargaining power to individual foreign governments.

In the world of international politics, nothing is “theoretically neutral” that can be used as an advantage against another country. In the case of our debt we are handing out that ability each and every time we spend more than we have and ask foreign governments to finance it. Another in a seemingly endless number of reasons to cut spending, stop borrowing, pay off our debt and get our financial house in order.

~McQ

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Digging into the March unemployment numbers

Not to make to much of them, but this is important to know when you hear some of what is going to pass for analysis today and this weekend.  Calculated Risk does a good job of drilling down into the numbers and giving them some context.

First, part timers.  The BLS reports:

The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) increased to 9.1 million in March.  These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

Calculated Risk adds:

The all time record of 9.2 million was set in October. This suggests the increase last month was not weather related – and is not a good sign.

Again, while any gross positive number is better than a negative number, other areas of employment don’t necessarily support an outlook that says “the job picture is turning around”. As if to emphasize that point, Gallup’s “underemployment” numbers were released today as well and they increased to 20.3% of the US workforce is underemployed – up from 19.8% in February.

A second number to consider is those who’ve been unemployed for over 26 weeks and would work if a job was available:

According to the BLS, there are a record 6.55 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 4.3% of the civilian workforce. (note: records started in 1948)

The number of long term unemployed is one of the key stories of this recession.

It is the highest number ever recorded since records started in 1948. The previous high was 2.5% in 1983.  And, as the cite points out, this is “one of the key stories of this recession” and one that isn’t yet showing signs of improving.

The Wall Street Journal points out:

A survey of private employers shows they shed 23,000 jobs in March in a sign that the labor market remains a mixed bag in an economy that is otherwise growing again.

The private-employer report, which came two days before the Labor Department issues its own, broader job report, was a disappointment to many who were expecting both measures to mark a turning point into positive territory.

Calculated Risk concludes:

Although the headline number of 162,000 payroll jobs was a positive (this is 114,000 after adjusting for Census 2010 hires), the underlying details were mixed. The positives: the unemployment rate was steady, the employment-population ratio ticked up slightly (after plunging sharply), and average hours increased (might have been impacted by the snow in February).

But a near record number of part time workers (for economic reasons), a record number of unemployed for more than 26 weeks, and a decline in average hourly wages are all negatives.

Shorter version: Don’t put too much positive weight on this month’s numbers.

There is a lot that has to change in the markets in general before you’re going to see any significant change in the labor market. So when you hear the talking heads this weekend tell you that it is all turning around and it will be sunshine and roses from now on, take it with a grain of salt.

[Welcome Real Clear Politics readers]

~McQ

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Corporations sitting on money and not hiring despite better March unemployment numbers

It certainly wouldn’t surprise me given the unsettled business climate.  And, in fact, that’s what the Bureau of Economic Analysis is reporting – a record 1.6 trillion is being held while companies sort out what is happening in the business and financial sectors.  That, of course, means it isn’t being spent on hiring.  But there’s another reason, other than the unsettled business climate that is keeping corporations from hiring:

“Companies slashed their work forces and now find that they could function far more resourcefully than they ever realized possible,” Bianco said. “If anything, we could start to see some of the money being used to expand overseas or to acquire other companies. In either case, that does not bode well for job creation. In fact, mergers lead to job reductions unfortunately.”

A nice way of saying, it may get worse. Companies have become more efficient and productive.  Because of that, most experts I’ve read expect the national unemployment rate – the U3 – to remain in the 9% area throughout the year.  Government efforts to spur hiring haven’t amounted to much:

Alan Krueger, assistant secretary for economic policy at the US Department of the Treasury, points out that President Obama recently signed a jobs creation act known as HIRE which includes a variety of incentives. HIRE, for example, exempts companies from paying social security payroll tax if they hire someone who has been out of work for more than two months, and offers them a $1000 cash bonus if they retain the worker for a full year.

That’s not going to tip the scales and cause a company to hire if solid business reasons don’t dictate such action.  And, as pointed out in the first cite, there’s a very good reason, at least at this point, not to hire – companies have learned to live and, in some cases, prosper without the employees they slashed.

One of the great surprises of the economic downturn that began 27 months ago is this: Businesses are producing only 3 percent fewer goods and services than they were at the end of 2007, yet Americans are working nearly 10 percent fewer hours because of a mix of layoffs and cutbacks in the workweek.

That means high-level gains in productivity — which in the long run is the key to a higher standard of living but in the short run contributes to sky-high unemployment. So long as employers can squeeze dramatically higher output from every worker, they won’t need to hire again despite the growing economy.

And right now, employers are indeed doing more with less and are not going to be inclined to hire more employees until it is clear that demand for their product is up, will continue to grow and requires more employees to produce their product and fulfill the consumer’s demand.

That all brings us to today’s March unemployment numbers:

The Employment report has shown good numbers throughout March today release but not as good as expected by market. NFP data has posted 162.000 new jobs in march, with a revision in the previous data to -14.000 from -36.000 in February. Market expectations were 187.000 new jobs in March. Unemployment rate remains at 9.7% in March, the same February number.

What that report doesn’t break out is the fact that the numbers are most likely inflated by the temporary hiring of census workers (and that will continue through June).  The Bureau of Labor Statistics did note it in its release:

Temporary help services and health care continued to add jobs over the month. Employment in federal government also rose, reflecting the hiring of temporary workers for Census 2010. Employment continued to decline in financial activities and in information.

So while +162,000 is obviously better than -162,000, the numbers aren’t really all that solid.  Also remember that our economy requires about 120,000 to 140,000 new jobs a month just to offset job loses elsewhere and maintain a static unemployment percentage.  And that’s pretty much what this month’s numbers show us and is the reason the unemployment percentage has remained static.  What would give us a truer picture of the rate is to remove the census hiring from the numbers. My guess is we’d still be well below the 120,000 to 140,000 threshold necessary to drop that rate.  But what the last three months may indicate is the labor market is finally bottoming out.

The point, of course, is that corporations are still in a position, driven by increases in productivity and lack of demand as well as an unsettled business environment, not to increase hiring any time soon.  The money corporations are sitting on, as noted, is going to go somewhere – most likely to increased dividends or mergers. And mergers actually mean fewer jobs, not more. Until companies see increased, well-defined and sustainable growth in demand to the point they can’t handle it with their present level of employees, they’re not going to hire no matter how many “jobs” bills Congress passes and Obama signs.

~McQ

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Greenspan: Treasury yields “canary in the mine”

Former Federal Reserve chief Alan Greenspan has commented on the recent sale of treasury bonds we commented on here and talked about on the podcast. They have him worried:

Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates.

Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television’s “Political Capital With Al Hunt.”

“I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.

When investors go to bonds, they’re looking for security. If they want higher risk, stocks are ready when they are. What Greenspan is talking about is this:

The Treasury Department sold $42 billion in 5-year notes on Wednesday at 2.605%, higher than traders had anticipated. Bidders offered to buy 2.55 times the amount debt being sold, the lowest since September. That metric of investor demand also compares to 2.74 times on average at the last four sales of the securities, all for the same amount. Indirect bidders — a class of investors that includes foreign central banks — bought 39.6% of the offering, compared to an average of 49.6% of recent sales and the lowest since July. Direct bidders, including domestic money managers, purchased another 10.8%, versus 9% on average. After the auction, yields remained sharply higher in the broader government-bond market as corporate and other higher-risk debt drew investors away from Treasurys. Yields on 10-year notes, which move inversely to prices, rose 13 basis points to 3.81%.

Says Greenspan:

“I don’t like American politics and what’s happening,” Greenspan said.

Historically, there has been “a large buffer between the level of our federal debt and our capacity to borrow,” he said. “That’s narrowing. And I’m finding it very difficult to look into the future and not worry about that.”

Well join the club – I don’t like what’s happening either. Nor do a whole bunch of other Americans. And a clue to our addled leftist friends – it has nothing to do with the race of our president. Instead it has to do with the ideology that he and Democratic leadership are pursuing to the detriment of the country and its solvency.

Back to the line I italicized in Greenspan’s statement. What does it mean? The obvious – continued economic problems, continued high unemployment and slow expansion. The message? The debt is out of hand, and it isn’t being addressed in any meaningful way.

For instance:

The Obama Administration is asking for $2.8 billion to help with ongoing disaster efforts in that Caribbean nation, responding to the devastating earthquake that struck Haiti in January.

“This request responds to urgent and essential needs,” wrote President Obama in a letter sent to Congressional leaders last week. “Therefore, I request these proposals be considered as emergency requirements.”

Let me translate that for you: “Therefore, I request that these amount of money needed for these proposals not be paid for, with the cost of the bill simply added to the deficit.”

That’s what “emergency” spending means in the Congress. It doesn’t go on the yearly deficit figure, but it does get added to the overall federal debt.

Now for those who are going to scream, “but Bush did it with the war”, I agree. Yes, he did it. And doing that was wrong. Clear enough? So whether it is for war or relief, it needs to be “on budget” – that’s if all the nonsense for Obama and the Democrats about PAYGO is to be believed.

Another example:

Last week Democrats in the House approved a $5.1 billion emergency disaster bill to pump more money into FEMA. While there weren’t any pork barrel items attached to that bill, the Democrats did add on a $600 million Summer Youth Jobs initiative, along with $60 million for a small business loan program.

And the $5.1 billion disaster aid had the necessary verbiage to keep it “off budget”.

“EMERGENCY DESIGNATION – SEC. 102. Each amount in this Act is designated as an emergency requirement and necessary to meet emergency needs pursuant to sections 403 and 423(b) of S. Con. Res. 13 (111th Congress), the concurrent resolution on the budget for fiscal year 2010.”

In other words, the cost does not have to be offset.

Unacceptable. Unacceptable when George Bush and the GOP did it. Unacceptable when Barack Obama and the Democrats do it.

They need to understand and be reminded that such avoidance of the PAYGO law requiring new spending be offset by cuts elsewhere is to be followed to the letter. Certainly there may be real emergencies, but the money spent is just as real. If we have emergencies that require immediate spending, then fine – give Congress some time (90? 120 days?) to find the offsets. But this nonsense about whatever they decide to call an “emergency” is off budget – to include wars – has to stop and stop now.

The money spent is real, the debt becomes larger – the fact that politicians pretend it doesn’t add to the deficit is insane and borders on criminal fraud and is certainly no better than Enron accounting.

~McQ

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CBO: Debt will be 90% of GDP by 2020

I’m sure this is a CBO report (the “gold standard” remember) that Democrats and the administration will try to ignore.  Especially since adding to the debt so significantly with ObamaCare.

President Obama’s fiscal 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years, $1.2 trillion more than the administration projected, and raise the federal debt to 90 percent of the nation’s economic output by 2020, the Congressional Budget Office reported Thursday.

In its 2011 budget, which the White House Office of Management and Budget (OMB) released Feb. 1, the administration projected a 10-year deficit total of $8.53 trillion. After looking it over, CBO said in its final analysis, released Thursday, that the president’s budget would generate a combined $9.75 trillion in deficits over the next decade.

Of course that’s a static assessment that assumes nothing changes over the next few years.  Or said another way, if left to their devices, this is precisely what Democrats and this administration plan for our future.  And all the denial in the world won’t change that.  This is a plan for fiscal ruin.

To put it in a more easily understandable context:

The federal public debt, which was $6.3 trillion ($56,000 per household) when Mr. Obama entered office amid an economic crisis, totals $8.2 trillion ($72,000 per household) today, and it’s headed toward $20.3 trillion (more than $170,000 per household) in 2020, according to CBO’s deficit estimates.

That figure would equal 90 percent of the estimated gross domestic product in 2020, up from 40 percent at the end of fiscal 2008. By comparison, America’s debt-to-GDP ratio peaked at 109 percent at the end of World War II, while the ratio for economically troubled Greece hit 115 percent last year.

So, is it time to demand those calling the path we’re on “unsustainable” (i.e. Timothy Geithner, Barack Obama  and the Democratic Congress) to put up or shut up?  As usual, we continue to hear Democrats blather on about PAYGO, but we continue to see them ignore it in legislation they pass.  It appears, given the budget numbers, they also plan to ignore it in the future – wouldn’t you say?

Look at that per household figure from 2008.  It was already outrageous and yet within the next 10 years they plan on tripling it to $172,000. 

Anyone have any idea of the effect such debt will have on our economy?

For countries with debt-to-GDP ratios “above 90 percent, median growth rates fall by 1 percent, and average growth falls considerably more,” according to a recent research paper by economists Kenneth S. Rogoff of Harvard and Carmen M. Reinhart of the University of Maryland.

Hey, when you have the fiscal policy of Greece or Argentina, what do you suppose the end result might be?

~McQ

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