Wednesday, June 22, 2011

A Washington Manmade Disaster

The Gulf oil spill is a good example of a manmade disaster. The Obama administration also considers a terrorist attack, such as the Fort Hood shooting, as a man made disaster instead of a terrorist attack. However, there is one man made disaster that Obama fails to classify as such. It is financial balance sheet of our nation. Below is an assessment of the dire financial situation facing our country.
There are two metrics that are used to indicate the health of an economy: Gross Domestic Product (GDP) and Unemployment. If the GDP is growing and unemployment is low then the economy is thriving while if the opposite is true, the economy is ill. Other important indicators of the nation’s financial standing are our budget and debt.

•In 1980 our Debt to GDP ratio was a fairly healthy 15.5%. This year our Debt to GNP ratio is expected to exceed 92% where the average over the past 30 years has been 52%. Our Debt to GNP ratio is approaching levels of no return. In other words, even raising taxes won’t reduce the debt back to historic levels. We have dug too big a hole.

•In 1980 our national budget to GDP ratio was roughly 10%. Today, this ratio is nearly 28%, while the average over the past 30 years was 17.5%.

•In 1980 Medicaid, Social Security, Medicare, and individual income (food stamps, housing, unemployment, government retirement, etc.) was equivalent to 4.1% of GDP and 40% of the national budget. Today, these entitlements account for 15.5% of GDP and 56% of our national budget. The average of these entitlements over the past 30 years was 8.8% of GDP and 50% of our national budget. However, these statistics may be misleading since the budget has increased over 600% over the past 30 years. Hence, budget increases have been masking the true impact of entitlement spending in our country. In fact, budget increases over the past two years are greater than our national budget in 1982 alone. Yet, despite massive budget increases, entitlement spending continues to grow and eat up a larger portion of the budget, and that is scary.

•In two years, the Obama White House spending spree has increased our debt from around 10 trillion to around 13.5 trillion dollars. Yes, our debt ballooned under Bush as well - about 4.2 trillion dollars over 8 years.

•In 1980, each employee in our workforce accounted for about 60,000 dollars of our GDP, 9,000 dollars of our Debt, 6,000 dollars of our budget expenditures, and about 2400 dollars of our entitlement expenditures. Today, due to technology advancements, illegal aliens, and foreign manufacturing, each workforce employee accounts for about 100,000 dollars of our GDP. That is the good news, because the workforce also accounts for 95,000 dollars of our debt, 27,000 dollars of our budget, and 15,000 dollars of our entitlement budget. Over the past 30 years the average workforce accounted for 77,000 dollars of our GDP, 41,000 dollars of our debt, 14,000 dollars of our budget, and 7,000 of our entitlement budget. And keep in mind, all of this is federal expenditures and does not account for the workforce’s burden on maintaining local and state budgets. The average household median income is under 50,000 dollars per year. Hence, even if the government took every cent that each worker earned; it would not pay for half of our 2010 federal budget and debt.

•Our unemployment rate the past two years has been 9.3% and 9.5% despite a shrinking workforce. The workforce is shrinking because too many people are discouraged and have given up on looking for jobs. The actual unemployment rate is estimated to be around 16%. And what’s worse, another high percentage of workers are in part time jobs. Over the past 30 years our average unemployment rate has been 6.2%, but the workforce was steadily increasing.

None of the above statistics are sustainable. Something has got to give. Expect higher taxes, but without the government making drastic cuts in the budget, especially entitlement spending, our debt will never be controlled. Unless something drastic is done, we are heading towards something equivalent to a terrorist attack or man made disaster of unequivocal proportions that will adversely affect the daily lives of every man, women, and child in America.

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