Frightening

I know I have not been posting much lately. Way too much going on. However, I had to share this because it scared me. It is from an investment group Wentworth, Hauser and Violich with emphasis added by me.

"While the near-term outlook for the United States economy appears favorable, the longer-term prospects are problematic because of the large increase in government spending, expansion of entitlement programs, large federal budget deficits and unfunded liabilities. Additionally, the increase share of the economy controlled by the federal government will crowd out the private sector and have adverse consequences for longer-term growth. Finally, the enormous expansion in the Federal Reserve's balance sheet has inflationary implications of unprecedented proportions."

"In fiscal year 2009, ended in September, the federal budget deficit jumped to $1.4 trillion from $459 billion in fiscal 2008. The deficit is forecast to be $1.6 trillion for fiscal 2010 and $1.4 trillion for fiscal 2011. The Congressional Budget Office (CBO) in March estimated that deficits between 2011 and 2020 would total more than $9.7 trillion. Total outstanding federal debt as of this writing is $12.8 trillion and based upon CBO estimates will jump to over $22.5 trillion in ten years. The federal government debt is growing at about $4.5 billion a day. These estimates do not include the two newly enacted entitlement programs of health care and student loans. The first full decade of health care legislation will cost about $2.4 trillion."

"Federal spending has increased from its historic post-WWII range of 20-21 percent of GDP to a baseline of 24-25 percent. Federal government spending currently represents about 27 percent of GDP. Revenues have averaged about 19 percent of GDP over the past 60 years. Historically the federal government has run a deficit of about 2 percent of GDP which is sustainable when GDP trend line growth is about 3.3 percent. Currently the deficit relative to GDP is about 11 percent. Interest on the federal debt is equal to about 13 percent of the deficit. by 2016 interest on federal debt will take up 100 percent of the deficit."

"Federal government debt will exceed 100 percent of GDP within ten years compared to 88 percent currently and 56 percent in 2007. Economists generally agree that 3 percent budget deficits and 60 percent debt to GDP are sustainable. Those criteria established by the Euro zone. The United States does not qualify for entry into the European Union."

"The unfunded liabilities of Social Security, Medicare, Medicaid, and other federal government employee pension programs together with the new health care entitlement are as high as $75 trillion, an amount that exceeds total world GDP. The Medicare trust fund runs out in 2017 while the Social Security trust fund runs out in 2037. This past year was the first time Social Security paid more in benefits than it received in payroll taxes and interest. Past CBO estimates of forward costs of current entitlement programs have understated the actual costs by a factor as large as 10. There are 78 million 'baby boomers', those born between 1946 and 1964, that will be moving from work to retirement in the period ahead."

"Additionally the various states are running unprecedented budget deficits. the new health care legislation places great burdens on the states as it expands Medicaid, the health care program for the poor that is shared by the federal government and the states. the recession and uncontrolled spending have created an estimated $196 billion deficit for state governments in fiscal 2010 resulting in Moody's Investors Service lowering the credit rating for five states' bonds. State and local government debt is a record 20.7 percent of U.S. GDP."

"There appears to be no political will to face these problems. Spending continues to grow. Tax increases are being budgeted, with taxes on individuals making more than $200,000 and couples making more than $250,000 for 2011, 2013 and beyond. However taxing this income group 100 percent would not close the budget gap. The probabilities of a European style value-added tax are high. Uncontrolled spending, expanded entitlement programs, further government intrusion into the economy, increased regulation and higher taxes are not conducive to optimum economic growth. The results may well be the loss of the AAA rating for the United States government obligations, a collapse of the dollar and runaway inflation."