February 22, 2011

Federal, state and local debt hits post-WWII levels

As the demonstrations and battles rage between government employee unions and governors/legislators in debt strapped states, what's missing is any realistic plan, particularly from the public employee unions, to bring the unsustainable spending, deficits and debt under control. Of course, this is to be expected because unions' sole interest is to expand/protect the wages and benefits of their members.

But government has become too large and overbearing driven by an entitlement culture fostered by politicians promising more than they can deliver and entitlement recipients (us, the citizens), if not demanding ever more benefits, then strongly resisting cuts to existing programs. This has all been exacerbated by the Great Recession. Perhaps for the nation, this is a blessing in disguise because it has exposed the unsustainable nature of government spending... living too high on the hog.

It's a travesty that TeamObama's budget fails to show Presidential leadership. Perhaps the crisis is not yet severe enough for rational leadership rather than political rhetoric

Unsustainable spending simply cannot continue. The 'entitlement mentality' argues that rich people should pay more, thinking that will solve the problem. It won't. Without economic growth creating jobs and more taxpayers to support an increasing population, we simply cannot spend our way out of this problem.

Politicians argue about ideology; special interest groups push to protect their piece of the entitlement pie; media talking heads feast on the controversy. Yet, little cooperative and concerted action is taken to actually fix the problem. Truly, "We have met the enemy and he/she is us."

"But today the U.S. economy is in a polar opposite condition. The labor force is aging, U.S. manufacturing often lags behind Asian and European rivals, households are in hock up to their eyeballs, and consumer appetite for goods is tepid. In addition, inflation is tame and government spending locked into entitlement programs and debt service that will be hard or impossible to alter.
"We're not growing like we were after World War II, so the amount of debt you can bear and the trajectory are much worse," Rogoff said."
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