March 23, 2010 | From theTrumpet.com
By Robert Morley
America’s economic future is on full display in Greece. Adding another massive government entitlement program is a great way to accelerate the timetable. By Robert Morley
America thinks it could never fall. Could Greece collapse? Yes. But America—not a chance. This is the richest country in the world. And in spite of all the headlines, in spite of all the dire statistics blared by reporters, the American way of life still continues. Gas stations still have gas. Food still sits on grocery shelves. Even if through debt, most Americans are still enjoying life. So surely America can’t be in that much financial trouble. After all, politicians just voted in potentially the largest expansion of the welfare state in American history on Sunday. America must have money to burn.
But here is the reality. It wouldn’t take much for the vulture investor dinner party to turn its sights from Greece to America. That is the conclusion of a small but growing group of concerned analysts.
“The wolf could be at our door sooner than we think,” says Carmen Reinhart, economics professor at the University of Maryland and author of This Time Is Different. Confidence in the dollar “could turn quite abruptly,” she says.
All it would take is one failed treasury auction, warns Reinhart, and the dollar’s status as a perceived safe heaven would vanish—along with its status as the world’s reserve currency.
If that were to happen, media commentators wouldn’t be comparing California to Greece, they would be comparing the entire nation to something more akin to Zimbabwe or Soviet Russia.
Politicians are far too complacent about America’s economic condition. Instead of getting America’s financial house in order now—while some analysts think it still has a chance—politicians are doing the exact opposite. Rather than seeing the crisis in Greece and cutting expenses and leading the country to live within its means—it is as if politicians are doing their level best to make it happen here too.
Sunday’s historic vote to implement national health care is a prime example.
Last week, the Congressional Budget Office (CBO) said that President Obama’s Health Care Reform bill would reduce the deficit by $138 billion. This estimate made headlines and is credited with creating much of the momentum that helped pass the bill.
The problem with that is this. That estimate is a total lie.
That estimate is based on double-counting and outright phony accounting. Just ask yourself, How can a bill that is going to provide health coverage for 32 million more people—without eroding the coverage of everyone else—actually reduce government spending?
The answer is that it can’t and it won’t.
Even the overtly liberal New York Times knows it is a lie. In an article titled “The Real Arithmetic of Health Care Reform,” Douglas Holtz-Eakin confirms that the job of the CBO is just to assert that the bill says what it says it says. In other words, the CBO’s job is just to examine the mathematics of the bill (i.e.: add up all the columns)—not to examine the assumptions built into it or comment on where the government says the money is going to come from.
For example, one way the government comes up with money to fund the health bill is by stealing from Peter to pay Paul, supposedly commandeering $53 billion from the Social Security fund. But what it is not telling you is that Social Security is already broke. Politicians have already spent Social Security’s money.
To get around this uncomfortable fact, government planners say that Social Security revenues will rise as employers shift from paying for health insurance to paying higher wages.
Ha! Businesses are going to automatically increase employee wages out of the goodness of their heart just because they will save money (theoretically) on paying health insurance? And they are going to do this at a time when many companies are struggling just to survive—and some are moving to Asia? And what about all the small businesses (those with under 50 employees) that will now have to begin paying for employee health coverage for the first time? Are these businesses going to pay higher wages as well? Or is it not more likely, if they employ 55 workers, that they will simply shrink their workforce?
As Holtz-Eakin says, “Fantasy in, fantasy out.”
According to Holtz-Eakin, “In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges: The health care reform legislation would raise, not lower, federal deficits, by $562 billion.”
And if history is a guide, then health care reform will probably cost even more.
“When Medicare was first proposed back in 1966, it cost $3 billion per year, and the projection was for inflation-adjusted annual costs to rise to $12 billion by 1990,” notes economist Peter Schiff. “The actual cost in 1990 was $107 billion, and the 2009 estimate is a staggering $408 billion!”
Government propaganda economists were only off by 900 percent on their cost estimates. How much will they be off by this time?
Analysts have criticized Greece for lying about its accounting practices, but America does the exact same things.
America has been lying about the Social Security money for years. And there is all sorts of creative accounting going on with the now-government-owned Fannie Mae and Freddie Mac. The government doesn’t account for those two $6 trillion junk-mortgage cadavers on its balance sheet either. Nor is the Federal Reserve and its trillion-dollar balance sheet consolidated into U.S. Treasury books. And the list of other “off-balance sheet” accounting doesn’t end there.
“The Greeks engaged in a variety of creative accounting practices,” warns former U.S. comptroller general David Walker. We may not be Greece, “But we could end with the same problems down the road if we don’t get spending under control and start dealing with our structure deficits soon.”
How soon? Walker says America might have two years.
From lying about its bookkeeping to adopting national health care, it seems that America is doing its best to emulate the one nation most likely to collapse in the near future.
Can America’s leaders not see what is happening?
Just a couple of weeks ago, Kansas City said that it will be forced to shutdown almost half the city’s schools by fall in order to stave off bankruptcy. Smaller cities across the country are in crisis mode. Some have already filed for bankruptcy. Whole states, such as California and Illinois, are on the road to bankruptcy. California may be forced to send out ious again instead of paying its bills.
Unemployment benefits have been extended for two years in many places. Real unemployment is near 20 percent. There is a second massive wave of residential mortgage resets heading America’s way. Home foreclosures are set to soar again. State and municipal pension plans are catastrophically underfunded. Collapsing commercial real estate is beginning to hammer America’s small and midsized banks. Round two of America’s spectacular banking collapse is looming. Moody’s and other debt-rating agencies have already warned that America is on the road to losing its AAA credit rating.
Unemployment benefits have been extended for two years in many places. Real unemployment is near 20 percent. There is a second massive wave of residential mortgage resets heading America’s way. Home foreclosures are set to soar again. State and municipal pension plans are catastrophically underfunded. Collapsing commercial real estate is beginning to hammer America’s small and midsized banks. Round two of America’s spectacular banking collapse is looming. Moody’s and other debt-rating agencies have already warned that America is on the road to losing its AAA credit rating.
And foreigners? Do you think they are going to continue lending money that, as is becoming increasingly obvious, will never be paid back—just so this administration can push its economically unsustainable agenda?
Ask Greece what happens when they stop.
These are the uncomfortable truths facing the nation.
The wolf is at the door, but instead of slamming it shut, it is as if America is inviting the beast in for dinner. •
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