The Four C’s of Deficit Crisis

Now that Obama and our Democratic Congress have signed us into trillions of dollars more national debt over the lifetime of entitlement health care insurance subsidies and long-term benefits, many who were rocked to the financial core by the recent Great Recession have awakened from financial stupor, are considering the probability of whether or not we are facing a future financial crisis far worse, and are raising the financial alarm.

C is for “Carte Blanche”

The United States has shown a flagrant disregard for spending staggering amounts of money that it does not possess, to sustain an economy that grows more socialized by the day. Under the present Administration and Congress, we continue to borrow devastating amounts of money, debt that low birth rate demographics predict fewer and fewer wage earners will carry, all while engorging the system with overwhelming numbers of additional dependents.

In addition to the Medicare and Social Security burdens that we are not currently meeting, two entitlements that went bust far more quickly than the Congressional Budget Office predicted, now we add student loan debt and ObamaCare. These are gargantuan education and healthcare legislation packages that “borrow” from previous insolvent entitlements in order to “balance” their new healthcare and education entitlement budgets.

In addition, the President promises more programs are on the way. This “borrowing” from insolvent programs is one of many legislative budget gimmicks, and it is scandalous. National budgets work like personal budgets. The only way to balance a budget is to increase income or cut spending.

Rather than cut spending, the government has elected to increase it exponentially, setting up the need for higher taxation. Higher taxes from fewer people combined with high unemployment and entitlements are all historical bedfellows of hyperinflation, the beginnings of which we have seeing in increasingly higher prices at the grocery store and the pump. Financial gurus everywhere are telling us this is the perfect storm for financial collapse.

C is for “Credit Rating”

By signing the final piece of the ObamaCare legislative agenda despite warnings about the resulting downgrade of our sovereign credit rating, Democrats are also now on record as favoring the disgraceful demotion. The United States' triple-A credit rating works much like a consumer's credit score. Creditors who believe an individual or country can repay on time and fully offer low interest rates and easy terms.

Those who spend beyond their means, however, pay late or not at all, and cannot afford future payments, pay higher interest rates and their access to new credit (spending) is limited to actual income. Numerous commentaries on our financial and political landscape caution that a downgrade in our stellar credit rating sets up a financial debt crisis that will make our recent mortgage crisis mild by comparison.

When one is no longer able to borrow to sustain the status quo, the status quo must go. Where the US economy goes, the rest of the world’s economy follows, but it is not just the US that is navigating these financial rapids. Industrialized nations everywhere with socialized economies have found themselves in the same economic boat, and there can only be more global trouble on the horizon with this trajectory.

C is for “CBO”

How can it be that such entitlements could be responsibly enacted when they are so financially forboding? Touting its financial telepathy, the president said repeatedly, "Those aren't my numbers. They are the savings determined by the Congressional Budget Office, which is the nonpartisan, independent referee of Congress for what things cost."

This is the Congressional Budget Office (CBO) that predicted Social Security would remain solvent through 2019, but due to the mortgage crisis, resulting recession and decreased tax revenue that it could not have predicted, is actually facing a shortfall this year. Both Medicare and Medicaid quickly cost much more than anticipated when they were first signed into law and Medicare hemorrhages red ink.

The CBO predicted that our two new healthcare entitlements will reduce the projected federal deficit over the next 10 years and actually improve America’s bottom line. It was the “ok” on which the President and Democrats ostensibly based the legislation.

But “fantasy” was the term former CBO Director Douglas Holtz-Eakin used to describe the budgetary assumptions behind the new federal health care overhaul, because he knows that the CBO only considers legislation as it is written, and not how lawmakers will skirt it as is their practice, “fix” it with new legislation, or borrow against it to fund other entitlements and programs.

He knows the budget gimmicks and insolvencies of other entitlements should have been taken into consideration along with the CBO’s determination on the “cost” of ObamaCare. He knows, too, that they were either ignored through blind ambition or not seriously considered at all.

No central authority, such as the CBO, can accurately predict the economic future or even completely protect consumers, as our Federal Reserve recently demonstrated during the mortgage crisis. Its job is to protect the dollar's value and to maximize employment, but it cannot do so in the midst of financial instability caused by bad debt.

C is for Taking “Cover”

Economists agree that the biggest financial crises, personally and nationally, arise from too much debt. Borrowers and lenders, happily floating in a bubble, fail to see the need for cash as a cushion against unforeseen circumstance and error, as the recent mortgage crisis demonstrated. When the bubble bursts, as it inevitably must, it leaves behind such overwhelming debt that it bankrupts whole industries, personal portfolios, and national economies.

Because both our President and Congressional Democrats have promised that our nation’s economic policy will continue on a “tax and spend” trajectory, we might be well advised to take whatever practical preparation might be needed to protect ourselves from further hardship and spiritually prepare our souls and lifestyles for more financial purge and poverty.