CHESSNOID

We see the big bailouts of banks, insurance companies,  auto companies and other private entities on top of the enormous so called stimulus bills with no results as of yet.  The government talks about green shoots and all that stuff but there are numbers that can’t be denied.  Foreclosures are still breaking records and the number of unemployed is just short of 7 million.  Where is all that money coming from to finance these projects and what are the consequences?

Forbes:

The bill is far too big for only the rich to pick up. There aren’t enough of them. America will have to lean on citizens far below the $250,000 income threshold: nurses, electricians, secretaries, and factory workers. Within a decade the average household that pays income tax will owe the equivalent of $155,000 in federal debt, about $90,000 more than last year. What the Obama administration isn’t telling Americans is that the only practical solution is a giant tax increase aimed squarely at the middle class. The alternative, big cuts in spending, aren’t part of the President’s agenda. To keep the debt from wrecking the economy, the U.S. would need to raise annual federal income taxes an average of $11,000 in 2019 for all families that pay them, an increase of about 55%. “The revenues needed are far too big to raise from high earners,” says Alan Auerbach, an economist at the University of California at Berkeley. “The government will have to go where the money is, to the middle class.” The most likely levy: a European-style value-added tax (VAT) that would substantially raise the price of everything from autos to restaurant meals.

How long can the government continue to spend more than it takes in? All the programs sound good, but how are we going to realistically pay for them. We have seen under the Bush administration spend more than we took in and we can see the direct results of that in our current economy. We continue to do the same thing under the Obama administration but at an accelerated pace, so we can only presume the consequences will be worse.

Forbes:

It can’t go on forever, and it won’t. What will shock America into action is the prospect of fiscal collapse, which will grow more vivid each year. In 2008 federal borrowing accounted for 41% of GDP, about the postwar average. By 2019 the burden will double to 82% by the CBO’s reckoning, reaching $17.3 trillion, nearly triple last year’s level. By that point $1 of every six the U.S. spends will go to interest, compared with one in 12 last year. The U.S. trajectory points to the area that medieval maps labeled “Here Lie Dragons.” After 2019 the debt rises with no ceiling in sight, according to all major forecasts, driven by the growth of interest and entitlements. The Government Accountability Office estimates that if current policies continue, interest will absorb 30% of all revenues by 2040 and entitlements will consume the rest, leaving nothing for defense, education, or veterans’ benefits.