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Obama admits the US is insolvent

D

Darwin333

Lifer
Wow, I can't believe that he actually admitted it. Of course most of the media outlets are focused on the relatively unimportant parts I would like to focus on the part were the President of the United States of America basically says we are broke, insolvent, bankrupt, etc... Keep in mind that this isn't about some date in the future, it is about the here and now. Today.


SANTELLI: Mr. President. If I were to ask an investor would he invest in a company that for every dollar it spent it had to borrow 42 cents, I think that investor would think long and hard. Now if you look at the amount of money the government takes in and the amount of spending, those are pretty much the numbers for our government right now.

Does it bother you that 42 percent of our spending is borrowed even understanding that we have to deficit spend under tough times. How long can the U.S. continue to spend in that fashion without potentially hurting our long time financial health.

OBAMA: Well, it bothers me a lot. It bothered me when I was running for office and it bothered me when I arrived and I had a $1.3 trillion deficit wrapped in a bow and waiting for me in the Oval Office. Notice the YEARLY deficit number

So, the answer to Rick's question is we've got to so something about it. And we have to do something about it fairly rapidly. The first thing you do is not dig it deeper. That's why this tax debate is important. We can't give $700 billion away to some of America's wealthiest people. We've got to make sure we're responsible for our budget, that's point #1.... Notice the TEN YEAR earnings from the tax hikes, reality is $700B out of $1.3T sounds pretty good but that is a, imho, purposeful misdirection. $70B a year out of $1.3T ain't all that grand

The one thing I have to say to the public is that about 60 percent of our budget is entitlements, Social Security, Medicare and Medicaid. And a lot of the discretion I have is somewhat limited on these programs.

Now part of the reason health-care reform was so important is because the biggest driver of our long term budget deficits is Medicare. If our economy is growing at 2 or 3 or 4 percent, but health care costs are going up 6, or 7 or 8 percent, than the budget will blow up no matter how many cuts I make in other programs...
Click to expand...

The italics are mine but the real meat is the bolded. Lets just round the numbers out and say that we borrow 40% of what we spend. Obama states, and I quote, "The one thing I have to say to the public is that about 60 percent of our budget is entitlements, Social Security, Medicare and Medicaid. And a lot of the discretion I have is somewhat limited on these programs". I am pretty good at math and I am pretty sure that 100 - 60 = 40. That means 100% of the revenue the Federal government generated this year went to entitlement programs that he admits he has little to no discretion over. Taxing the rich wouldn't have helped much either, hell we throw around $70B like its nothing these days.

It gets better though, a few things not in that "non-discretionary spending" include interest on the debt (non-discretionary my ass), ALL DEFENSE SPENDING, the DOJ, the Dept. of Education, Homeland Security, HUD, Veterans Affairs, Department of Energy, COE (fuck those bastards anyway), or even the EPA. ALL of the above is funded by borrowed money and taxing the rich will raise a mere drop in a very large bucket.

It gets even worse looking forward. Interest on the national debt is sure to take a rocket shot in the near future due to the way our current debt is structured. The employment picture is not improving in any meaningful way and per capita wages are dropping. The bottom line is that revenue is not going to return to pre-recession rates anytime soon. For that matter, "pre-recession revenue" isn't a good baseline because it was revenue generated during a bubble.

For the cherry on top, all of those that think we can "inflate" our way out of this, besides destroying the housing market and the Federal budget itself (interest on the debt goes to the moon), most of those entitlements are indexed to inflation. Anyone wanna wager that our politicians will change that anytime soon?

Bottom line: The President admitted that we be fucked and he can't do a thing about it.

source
 
"So, the answer to Rick's question is we've got to so something about it. And we have to do something about it fairly rapidly. The first thing you do is not dig it deeper."

"That's why we passed yet another entitlement bill this year. We can't afford it, but we passed it anyway. Wait, what was your question again?"
 
Darwin333 said:
Wow, I can't believe that he actually admitted it. Of course most of the media outlets are focused on the relatively unimportant parts I would like to focus on the part were the President of the United States of America basically says we are broke, insolvent, bankrupt, etc... Keep in mind that this isn't about some date in the future, it is about the here and now. Today.




The italics are mine but the real meat is the bolded. Lets just round the numbers out and say that we borrow 40% of what we spend. Obama states, and I quote, "The one thing I have to say to the public is that about 60 percent of our budget is entitlements, Social Security, Medicare and Medicaid. And a lot of the discretion I have is somewhat limited on these programs". I am pretty good at math and I am pretty sure that 100 - 60 = 40. That means 100% of the revenue the Federal government generated this year went to entitlement programs that he admits he has little to no discretion over. Taxing the rich wouldn't have helped much either, hell we throw around $70B like its nothing these days.

It gets better though, a few things not in that "non-discretionary spending" include interest on the debt (non-discretionary my ass), ALL DEFENSE SPENDING, the DOJ, the Dept. of Education, Homeland Security, HUD, Veterans Affairs, Department of Energy, COE (fuck those bastards anyway), or even the EPA. ALL of the above is funded by borrowed money and taxing the rich will raise a mere drop in a very large bucket.

It gets even worse looking forward. Interest on the national debt is sure to take a rocket shot in the near future due to the way our current debt is structured. The employment picture is not improving in any meaningful way and per capita wages are dropping. The bottom line is that revenue is not going to return to pre-recession rates anytime soon. For that matter, "pre-recession revenue" isn't a good baseline because it was revenue generated during a bubble.

For the cherry on top, all of those that think we can "inflate" our way out of this, besides destroying the housing market and the Federal budget itself (interest on the debt goes to the moon), most of those entitlements are indexed to inflation. Anyone wanna wager that our politicians will change that anytime soon?

Bottom line: The President admitted that we be fucked and he can't do a thing about it.

source
Click to expand...

This is not how our economy works. The US government does not pay for programs with taxes or borrowing and it is not revenue constrained, it is inflation constrained. The US government does not need to issue bonds to pay for things.

http://www.cfeps.org/pubs/wp/wp10.html
 
woolfe9999 said:
Maybe I'm dyslexic today, but where in that quoted fragment did Obama "admit that the US is insolvent?"

- wolf
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When he stated that the entirety of our revenue is spent on ONLY entitlement programs that he has little to no ability to cut.

That kinda leaves no money left over for the other things like interest on the debt or DOD or DOE, you know the little non-important things.

When you have to borrow money to pay the interest on money you have already borrowed (and those payments are going WAY up soon if history is any indicator) wouldn't you agree that is pretty damned insolvent?
 
Darwin333 said:
When he stated that the entirety of our revenue is spent on ONLY entitlement programs that he has little to no ability to cut.

That kinda leaves no money left over for the other things like interest on the debt or DOD or DOE, you know the little non-important things.

When you have to borrow money to pay the interest on money you have already borrowed (and those payments are going WAY up soon if history is any indicator) wouldn't you agree that is pretty damned insolvent?
Click to expand...

Well OK, but your thread title is a misleading teaser. What we have is Obama admitting that the federal government has serious financial problems and he's putting some numbers to it. This, BTW, is nothing new as you claim, since he's said it before, numerous times.

- wolf
 
Darwin333 said:
When you have to borrow money to pay the interest on money you have already borrowed (and those payments are going WAY up soon if history is any indicator) wouldn't you agree that is pretty damned insolvent?
Click to expand...

The US govt's budget is not like your household budget. It does not have to borrow money to spend money. Treasuries serve the purpose of manipulating interest rates. They are not required.
 
Ok Darwin333, lets us assume Obama admitted the US is insolvent. Even if there is no evidence that he did.

But still, the US insolvency question is a free standing, regardless of which US turkey leader idiots want to blame.

Well truth be told, as soon as the US balance of trade surplus went South around 1980 and has kept going South ever since, yes boy and girls, the US is a heading for insolvency, and only total idiots like Darwin333 could blame Obama if he tells the truth finally.

The USA has been insolvent long before Obama became President.
 
We can't give $700 billion away to some of America's wealthiest people.
Click to expand...
Hmm, seems like just yesterday I was being told that no one considers tax cuts as spending, that this was merely a straw man. Didn't take too long for the Messiah to put that one to bed. Amusingly he apparently thinks that not taking money from some high earners is giving them a gift, whereas actually giving tax money to some other high earners (aka bailouts) is merely an "investment". Go figure.

On the plus side, even leg-tingled Chris Matthews has finally awakened to reality and asked Walks-On-Water and the Dems to stop referring to tax cuts as gifts. Government NOT TAKING something you earned is NOT equal to government giving you a gift; government GIVING you something someone else earned IS equal to government giving you a gift - and giving us the bill.
 
Those millions of dollars of Gold sold from Beck's show at a stupid premium may not be a bad deal after all.
 
Lemon law said:
Ok Darwin333, lets us assume Obama admitted the US is insolvent. Even if there is no evidence that he did.

But still, the US insolvency question is a free standing, regardless of which US turkey leader idiots want to blame.

Well truth be told, as soon as the US balance of trade surplus went South around 1980 and has kept going South ever since, yes boy and girls, the US is a heading for insolvency, and only total idiots like Darwin333 could blame Obama if he tells the truth finally.

The USA has been insolvent long before Obama became President.
Click to expand...

Can print so I'm not sure how a we are insolvent. People , cities and states go insolvent not Federal Govts.
 
Lemon law said:
Ok Darwin333, lets us assume Obama admitted the US is insolvent. Even if there is no evidence that he did.

But still, the US insolvency question is a free standing, regardless of which US turkey leader idiots want to blame.

Well truth be told, as soon as the US balance of trade surplus went South around 1980 and has kept going South ever since, yes boy and girls, the US is a heading for insolvency, and only total idiots like Darwin333 could blame Obama if he tells the truth finally.

The USA has been insolvent long before Obama became President.
Click to expand...

Please point out the exact phrase that I used to blame Obama. Thanks in advance.
 
Zebo said:
Can print so I'm not sure how a we are insolvent. People , cities and states go insolvent not Federal Govts.
Click to expand...

I believe federal level governments can go insolvent/bankrupt as well. Its usually followed by the collapse of the country or a revolution though.

Its ironic though, a great of the current US budget problem stems from his massive spending. He's either caused, or refuses, to fix the very problems he's commenting on.
 
Bateluer said:
I believe federal level governments can go insolvent/bankrupt as well. Its usually followed by the collapse of the country or a revolution though.

Its ironic though, a great of the current US budget problem stems from his massive spending. He's either caused, or refuses, to fix the very problems he's commenting on.
Click to expand...

Or not tax taxing enough depending on your POV. Hard to "fix" either problem. We won't throw grandma in the streets and don't want to raise taxes hence deficit.
 
BigDH01 said:
The US govt's budget is not like your household budget. It does not have to borrow money to spend money. Treasuries serve the purpose of manipulating interest rates. They are not required.
Click to expand...

So am I to understand that your argument is that we truly aren't out of money yet because we still have checks?

Or better put, the Feds can print and spend as much as they want with zero impact on inflation and the bond market has absolutely no control?
 
Zebo said:
Can print so I'm not sure how a we are insolvent. People , cities and states go insolvent not Federal Govts.
Click to expand...

Printing makes the problem worse not better. Like I said, the fact that our entitlements are "indexed to inflation" alone is enough, add to that the way our debt is structured and the current state of our housing market..... fast death instead of a slow one.
 
Darwin333 said:
So am I to understand that your argument is that we truly aren't out of money yet because we still have checks?
Click to expand...

No, my argument is that sovereign nations that create their own non-convertible currency are never out of money.

Or better put, the Feds can print and spend as much as they want with zero impact on inflation and the bond market has absolutely no control?
Click to expand...

Only as long as utilization is low and thus there is a general lack of aggregate demand. Why is this so hard to believe?

The government has complete control over the supply of bonds. It can choose to sell bonds or not.

Here is a recent letter written to the Commission on Deficit Reduction by Professor Galbraith:

http://www.newdeal20.org/wp-content/uploads/2010/06/deficitcommissionrv.pdf

Since you aren't going to read the other article I posted, you could perhaps read this. It's a bit more reader friendly.
 
Darwin333 said:
most of those entitlements are indexed to inflation. Anyone wanna wager that our politicians will change that anytime soon?
Click to expand...

this is a great solution that I am in support of. It's the most politically easy way to "discontinue" the entitlements, something which must be done.
 
Federal Governments cannot go bankrupt?????????????????????

Maybe someone needs to tell that to Greece, Iceland, Argentina, and some other recent countries.

The point is and remains, many countries reach a point where the international community has zero faith in their ability to repay loans they take out, and once those countries can no longer borrow money to keep their ship of fools policy foolishness
propped up, their merry go round comes to a screeching halt.
 
Lemon law said:
Federal Governments cannot go bankrupt?????????????????????

Maybe someone needs to tell that to Greece, Iceland, Argentina, and some other recent countries.
Click to expand...

These countries had debt to pay in currencies beyond their control. The US has debt denominated in dollars.

The point is and remains, many countries reach a point where the international community has zero faith in their ability to repay loans they take out, and once those countries can no longer borrow money to keep their ship of fools policy foolishness
propped up, their merry go round comes to a screeching halt.
Click to expand...

The US does not need to take out loans to pay for anything.
 
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