A Time for Honesty, Sacrifice, and a Serious Financial
Course Change
by
Mike Larson
I
just got back from my first lengthy vacation in years — to
New York, London, and Paris. I enjoyed many fine meals and
fun nights out with friends. I got to see everything from
the Rosetta Stone and St. Paul's Cathedral to the Mona
Lisa and the Eiffel Tower.
The
only real downside? The lousy January weather!
But
perhaps the biggest highlight of the trip, at least for a
history buff like me, was the Churchill Museum and Cabinet
War Rooms just off St. James Park in Westminster. Tucked
away in the basement of the U.K. Treasury, the facility
allows you to experience what it was like during the Nazi
"Blitz" of World War II.
Beginning in the mid-1940s and continuing for months on
end, successive waves of Nazi fighters and bombers began
pummeling the British coastline. They struck the British
airfields next before moving on to British towns and
cities, including London.
You
can eyeball the cramped, low-ceilinged meeting rooms where
Churchill and staff pondered the course of the war amid
thick, acrid clouds of cigar and cigarette smoke.
You
get to see the Spartan sleeping quarters they made do
with, and the musty old maps of Europe, the U.K., and the
North Atlantic they used to track troop movements and
convoys.
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Churchill didn't pull any punches when he gave his
regular radio speeches. |
You
can listen to the speeches Churchill delivered even as the
bombs fell — never lying to the British public about the
dire straits they were in ... but also never failing to
inspire.
Perhaps most disturbing of all, you can view the yellowed
casualty lists they used to track the dead and wounded
from the Nazi bombardment. More than 20,000 ultimately
perished in London alone.
Then and Now ...
Not
much has changed in the nearly 64 years since the facility
was mothballed. But I still couldn't help but be inspired
from my visit. After all, Londoners persevered during the
Blitz. Churchill didn't back down. The Brits "kept calm
and carried on." And ultimately, the Allies won the great
war.
Why
do I bring this all up? Because I feel like we've lost
that ability for politicians to level with us, especially
when it comes to financial matters. There's no Churchill
on the airwaves willing to tell it like it is, and asking
for personal sacrifice.
Instead, politicians keep promising the sun, the moon, and
the stars — even though we simply can't afford it. We're
SPENDING like there's a massive world war going on even
though there isn't! And no one seems to want to change
this course we're on.
You
can already see
"budget bombs" scoring direct hits in Athens. And
they're landing on the outskirts of Lisbon. If we don't do
something about it soon, one of 'em is going to land
squarely in Washington — with bond prices plunging and
interest rates soaring!
CBO Warns of Never-Ending
Budget Woes ...
Just
a few short days ago, the Congressional Budget Office (CBO)
became the first official D.C. source to open its bomb bay
doors and let loose on all of us. The CBO's projections:
Instead of falling substantially from $1.4 trillion in
2009 (9.9 percent of GDP), the 2010 deficit would
essentially hold steady at $1.35 trillion (9.2 percent of
GDP).
The
massive 2010 deficit would be followed by another $980
billion deficit in 2011 ... $650 billion in 2012 ... and
$539 billion in 2013. Total red ink through
2020: $7,400,000,000,000!
As
stunning as those figures are, long-term projections
usually UNDERESTIMATE the deficit. Roughly 80 percent of
the four-year deficit forecasts issued in the past three
decades ultimately proved too optimistic, according to
The New York Times.
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Politicians love spending what isn't theirs. |
Why?
Those forecasts rely on growth, revenue, and spending
projections that don't pass the test of time. Politicians
just can't help themselves — pandering, over-borrowing,
and overspending is in their nature.
Just
consider this: Two years ago, the CBO forecast the 2010
deficit would be $241 billion. Now the CBO is throwing
that projection out the window and saying it'll be more
than FIVE AND A HALF TIMES AS BIG!
Obama Unleashes Carpet-Bombing
Campaign of Red Ink ...
But
if you thought the CBO numbers were bad, you should read
through the Obama administration's latest budget. It
forecasts a whopping $1.6 trillion deficit
this year — more than $200 billion above and
beyond the CBO's numbers. That would come to 10.6 percent
of GDP, the worst in modern time.
What
about 2011?
Another $1.3 trillion. And the years after that? More of
the same. The White House Office of Management and Budget
(OMB) is now expecting $8.5 trillion in red ink over the
next decade, with the annual deficit NEVER falling below
the 3 percent-of-GDP threshold considered fiscally
responsible.
It
gets worse ...
Those projections assume relatively rosy growth — 3.8
percent next year, and more than 4 percent over the
following three years. We've only seen a string of 4
percent+ growth readings twice in the past three decades.
The
projections also include assumptions about taxes and
spending discipline that won't pass the test of time. One
example: The OMB projects $250 billion in savings from a
proposed three-year freeze on a significant chunk of
domestic spending. Increases thereafter would be limited
to the inflation rate.
I
don't know about you, but I think the chance of that
happening is somewhere between slim and none! Neither the
Democrats nor the Republicans have shown any real spending
discipline. There's no reason to assume they'll have a
"Eureka!" moment in the middle of the decade.
And
I'm not even getting into the Social Security- and
Medicare-related problems. We've promised trillions in
benefits over the coming years that also threaten to blow
our nation's balance sheet to smithereens.
Debt, Debt, Debt.
And Did I Mention Debt?
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U.S. public debt is expected to double in 10
years. |
Bottom line: A never-ending wave of budget bombs is headed
our way in the coming years. That will drive the total
U.S. public debt load inexorably higher — from about $9.3
trillion in 2010 to $18.6 trillion by 2020. And the cost
of servicing all that debt? It's projected to
more than QUADRUPLE from $188 billion to $840 billion!
I'm
at a loss for words, folks. These figures are horrendous
... outrageous ... infuriating ... and terrifying all in
one. They paint a picture of a country that's on a
collision course with financial catastrophe.
We
CAN still turn things around. We can pull our nation out
of this fiscal tail spin. Heck, if the average Londoner
could pick himself out of the rubble of his home, brush
himself off, and head to work in the middle of the Blitz,
then we can show the same stoic resolve here.
But
that will take real political courage and real sacrifices.
There is no easy way out.
Until next time,
Mike
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