The Obama administration continues to spend and shows no signs of slowing down anytime soon. The next debt crisis is right around the corner despite the financial reform bill passed by the Democrats. Chris Dodd said that we wouldn’t know if this bill would work until the next financial crisis.
Germany has turned away from socialism and is now using austerity programs to cut the deficit and spur their economy. This is the direction America must take to get us away from the Keynesian economics that has failed to create jobs or kickstart the economy.
The US needs to take urgent action to cut its debt in order to prevent the next financial crisis, which may start in Washington, Sheila Bair, chair of the Federal Deposits Insurance Corp. (FDIC) wrote in an editorial in the Washington Post.
The federal debt has doubled over the past seven years, to almost $14 trillion, and the growth is a result of both the financial crisis and the government’s “unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit,” Bair wrote.
Bush added $4.9 trillion during his 8 years and Obama has spent $3 trillion in 20 months. Both are big spenders but Obama is going to break the record.
Retiring baby boomers will impact government spending heavily and this year, combined spending on Social Security, Medicare and Medicaid are expected to make up 45 percent of primary federal spending, compared with 27 percent in 1975, she explained.
Then add the millions that ObamaCare puts on the Medicare rolls while cutting $500 billion from Medicare and it will be much worse.
“Defense spending is similarly unsustainable, and our tax code is riddled with special-interest provisions that have little to do with our broader economic prosperity,” Bair wrote. “Overly generous tax subsidies for housing and health care have contributed to rising costs and misallocation of resources.”
Our tax codes allow 47% of Americans to pay no federal income tax at all.
If no action is taken, US federal debt held by the public could rise from 62 percent of gross domestic product this year to 185 percent in 2035, she warned.
“Eventually, this relentless federal borrowing will directly threaten our financial stability by undermining the confidence that investors have in U.S. government obligations,” Bair said.
“With more than 70 percent of US Treasury obligations held by private investors scheduled to mature in the next five years, an erosion of investor confidence would lead to sharp increases in government and private borrowing costs,” she added.
There needs to be “a bipartisan national commitment” for an austerity package of both spending cuts and tax increases over many years in order to solve the problem, according to Bair.
This is why Obama created the ‘deficit commission.” He will use it as a shield when he raises taxes.