Well, faithful readers, it is time for the very lengthy third part of my trilogy. Parts one and two below were necessary to provide context for this third and most important discussion. Below is my analysis of the current economic crisis in the United States and, ultimately, the world. As my title above suggests, it is not a pleasant prognostication.
Long time readers know that I have been sounding the alarm siren for the last six months. As soon as it became obvious that our Congress and President were on the wrong track in handling the economic downturn, I've done my best to bring the keys issues to the forefront. This link here will take you to a dozen or more past blog entries where I've outlined the coming problems and condemned in no uncertain terms the horrific Economic Stimulus Package.
Sadly, a quick review of comments from many readers proved two tragic facts. First, most people simply want to "play politics" and never, under any circumstances, read legislation or consider alternative solutions. If our fellow Democrats did it, it must be good. If Republicans proposed it, it's stupid, lame, old school and wrong.
Second, all too many people are just here for the free lunch. As long as some other "rich guys" pay the bills and they believe they'll eat for free, then they'll line up at the trough. Every day is a holiday and every meal is a banquet.
So just how bad is it? It's very, very bad. And you're going to feel the pain as early as tomorrow.
Borrow and Spend Democrats
I am a rather proud "tax and spend" Democrat. There are many things I genuinely believe the government can do better than the private sector and many others that the government must do because the majority of people simply will not do them. The beauty of being a "tax and spend" Democrat is there was a natural barrier that prevented us from going overboard: TAXES. If taxes got too high, the electorate would reign us in. And, as long as we worked with a nearly balanced budget, this system was nearly prefect.
Plus, by answering to the actual tax payers, we were forced to be honest, efficient and logical. We were forced to prioritize.
Today, under the vacuum of leadership from Nancy Pelosi and Harry Reid and the naivete of President Obama, none of that is happening. Instead of tax and spend, the new priority is borrow and spend without restraint. There are literally no priorities. There is no restraint. Pork barrel spending abounds, in fact it has become the coin of the realm. Payoffs are common place, corruption is rampant and institutionalized.
Barack Obama was and is totally unprepared for his job as President. He is no more than the band leader on the Titanic. The ship is sinking and it will take him down.
Where We Stand
About 500,000 new people apply for unemployment each week. Over 9 million new unemployed have been added to the dole since the pathetic non-Stimulus Bill passed. Unemployment has reached a 30 year high at 9.5% and virtually every economist predicts is will be over 10% by August.
Because the non-Stimulus Bill was nothing more that a massive pork barrel spending give-away three horrible things have happened. First, only about 7% of the money has actually been spent. Only 11% will be spent by year's end. Did Barack Obama lie? No, I don't think so. He simply had no idea what Nancy Pelosi and Harry Reid were doing. Again, Barack Obama was (and still is) woefully unprepared to play at this level.
Second, the stimulus money turns out to be primarily rewards for contributors and patrons. I know this comes as a total surprise to everyone, but the vast majority of the money seems to be headed to states that supported and voted for Democrats! WOW! Who knew?
Third, and perhaps most tragic, the paltry sums of money that are flowing out as being pirated away for bankrupt states and used to pay bills or lower debt, not for any stimulus at all. The report issued today by the General Accounting Office paints a tragic picture of misuse of funds.
But the surprises hardly end there. It turns out there actually were (and are) shovel ready projects needing funding and ready to hire people. Are they getting the money? Nope. Not according to an analysis by The New York Times.
In short, not one single job has been created and only a handful of jobs have been saved. This could have all been avoided. A stimulus package costing 1/3rd less was proposed and on the table from Republicans. Every single penny would have been spent to hire people for permanent, full time, high paying jobs. But, of course, none of it would have gone to pay off contributors. None would have been wasted. And it would be working hard today, not on hold until 2010 and 2011.
Where Are We Headed?
By borrowing insane amounts of money and not taxing anyone for anything yet, Democrats have appealed successfully to both the party partisans and the pigs down at the trough. But that's all about to end.
Interest rates are about to skyrocket. I know of no economist who predicts less than a doubling of interest rates in the next few months. While that assures there will be absolutely no recovery in the economy, it is actually much worse. As interest rates eclipse 7% the government will be totally unable to service the huge deficits. One hundred million dollars a day in interest!
Because of the inevitable collapse of the US economy, tax increases will move from counterproductive to impossible. My essay back on March 7th was tragically accurate, we are on the same economic policy path that led to The French Revolution. Let them eat cake!
President Obama's current drive for universal health care, a laudable goal, is moot. No matter what bill passes, the program will collapse, along with Social Security and the current Medicare/Medicaid in the next few years. We cannot borrow ourselves out of debt. We cannot service the debt. We cannot tax our way out of debt. Like a chess player who has been out maneuvered, we have no moves remaining. Checkmate.
Is there a way out? Like the immortal line from the movie War Games, the only way to win is not to play. Because of the non-Stimulus Bill and the pork filled Budget recently passed, it may already be too late. Inflation is coming. And the deficit is unsustainable. And Democrats are sadly still playing politics.
The public is about to explode. They are already feeling the pain. Even after siphoning off stimulus money, states are making critical cuts in goods and services. California, Illinois and New York are about to undertake massive layoffs that will further balloon stressed out welfare rolls. California is issuing virtually worthless IOU's to taxpayers and creditors as their bonds are being lowered to near junk status. Illinois is about to release 10,000 prisoners because they simply cannot pay the guards.
You are about to feel serious pain and it's just the beginning. We are entering The Greatest Depression.
It is likely Obama will end his single term as a badly failed President in spite of his many great talents. While Republicans are unprepared to regain control of both houses next election, they will make serious gains. And real, thinking Democrats will quickly break with Pelosi and Reid and Obama, if necessary, to demand repeal of most spending plans and reduced borrowing.
I'm not at all certain that is will be anywhere enough.