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Treasury Secretary Says Nation Could Face Debt Default in Less Than Three Weeks

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Treasury Secretary Janet Yellen warned congressional leadership on Monday that the federal government could face a debt default in less than three weeks if an agreement on the debt ceiling is not quickly reached with President Joe Biden.

The debt ceiling, a policy that prevents the federal government from spending beyond a predetermined national debt limit of $31.4 trillion, surpassed the threshold earlier this year. Yellen said in her letter to lawmakers that the Treasury Department expects to default on obligations as early as June 1 unless the debt limit is either suspended or increased.

“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” she wrote. “In fact, we have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June.”

Yellen added that the exact date of the debt default is “impossible to predict,” although the June 1 estimate is based on federal receipt, outlay, and debt data.

“If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests,” she continued. “I continue to urge Congress to protect the full faith and credit of the United States by acting as soon as possible.” (Read more from “Treasury Secretary Says Nation Could Face Debt Default in Less Than Three Weeks” HERE)

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Study Finds This City Has the Highest Taxpayer Burden in the United States

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America’s 10 largest cities, largely Democrat strongholds, are drowning in municipal debt, according to a new report from government watchdog Truth in Accounting.

The report sought out “to determine what … overlapping financial entities mean for taxpayers’ bottom line.” Truth in Accounting said its purpose was to “calculate the various bills (and surpluses, when available) at the city government level and divide them out to determine a per-Taxpayer Burden.”

The two cities with the highest burden: Chicago and New York City; Chicago’s combined taxpayer burden: $119,110; New York City’s combined taxpayer burden: $85,600. . .

The Chicago City Council approved $2.4 billion in tax subsidies for two major developments in early April. Protesters gathered at City Hall chanting against the deals. Critics said the projects are in prosperous parts of Chicago and developers should pay for infrastructure improvements, not taxpayers. . .

Forbes reported that the city’s taxpayer burden is attached to unfunded retirement obligations amassed over of a number of years: $39 billion in retirement benefits have been promised; $28 billion in pension and $842.9 million in retiree health care benefits haven’t been funded. (Read more from “Study Finds This City Has the Highest Taxpayer Burden in the United States” HERE)

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The Democrat-Media Meltdown Over Special Olympics Funding Is Everything We Hate About Washington

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The current debate surrounding grant funding for the Special Olympics is an excellent case study of why our country will probably never get out of debt.

In case you missed it, there’s been a fair amount of outrage over the Department of Education’s budget proposal to cut $18 million in federal grant money to the Special Olympics. The proposed budget states that “such activities are better supported with other federal, state, local or private funds.”

On Wednesday, Education Secretary DeVos responded to widespread criticism of the proposed spending reduction with a statement saying:

The Special Olympics is not a federal program. It’s a private organization. I love its work, and I have personally supported its mission. Because of its important work, it is able to raise more than $100 million every year. There are dozens of worthy nonprofits that support students and adults with disabilities that don’t get a dime of federal grant money. But given our current budget realities, the federal government cannot fund every worthy program, particularly ones that enjoy robust support from private donations.

Sen. Dick Durbin, D-Ill., confronted DeVos on the proposed spending reforms during a Senate Appropriations subcommittee hearing on Thursday and said that whoever came up with the idea for the cuts “gets a Special Olympic gold medal for insensitivity.”

DeVos responded to Durbin’s questions by saying that she wasn’t personally involved in that decision and that she hopes that the debate drives more private donations to the organization. She added: “Let’s not use disabled children in a twisted way for your political narrative. That is just disgusting and it’s shameful.”

Furthermore, according to a report at Politico, DeVos has even been an advocate against cutting the grant funding for years.

But Durbin’s not alone. Multiple congressional Democrats have used the news to score points against the administration.

Appropriations subcommittee chair Sen. Roy Blunt, R-Mo., responded to the controversy by saying, “Our Department of Education appropriations bill will not cut funding for the program.”

This is a classic case-study example of why we’ll never deal with our national debt crisis (and it IS a crisis).

As I’ve said before, the cuts have to come from somewhere, and the federal leviathan has become so massive and intrusive that there is literally no proposed spending cut that won’t affect someone in this country. And there’s no portion of the federal budget for which advocates can’t or won’t use emotional pleas to avoid spending reductions. But the cuts still have to come from somewhere.

And when emotional arguments are made about sympathetic subjects of proposed spending reductions, the headlines, press releases, and outraged social media posts pretty much write themselves.

So, let’s take the emotion out of this argument for a while. The question isn’t who does or doesn’t care about kids with disabilities; it’s whether or not it makes sense for a country that is over $22 trillion in debt and facing projected trillion-dollar deficits to fund any successful private charity, regardless of what its mission is.

Finally, since we went without a Federal Department of Education for the first 203 years of our republic, it’s more than valid to question whether or not we need to spend the operational costs of the agency itself. Rep. Thomas Massie, R-Ky., has a bill to terminate it, by the way.

The Special Olympics is a great organization that does some important work. If the politicians and pundits who have used this story to light up the political scoreboard plan on still caring about the Special Olympics’ operating budget when the news cycle moves on to the next font of outrage, consider this an open invitation to join me at next year’s Polar Plunge. (For more from the author of “The Democrat-Media Meltdown Over Special Olympics Funding Is Everything We Hate About Washington” please click HERE)

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Do People Care That the US Will Add $12 Trillion to the Debt in 10 Years, or Am I Wasting My Time Writing About It?

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There’s a new government report on the national debt and deficit that reiterates the country is screwed if Congress and the president cannot be fiscally responsible.

According to the latest estimate from the Congressional Budget Office, the U.S. will add another $12 trillion in public debt over the next decade as economic growth slows and government spending increases. Over the past 50 years, federal deficits have averaged 2.9 percent of Gross Domestic Product (GDP), but no more. The CBO projects that in the next ten years, federal budget deficits will average 4.4 percent of GDP, totaling $11.6 trillion.

Taxes are also projected to increase once certain income tax provisions in the 2017 tax reform bill expire at the end of 2025, but the projected increase in revenues will not make up the deficit. Social Security, Medicare, and other mandatory spending continue to be the largest drivers of the debt. As the population ages, the government will need to spend more money on programs for the elderly. Discretionary spending is expected to fall because of budget caps Congress has passed — but Congress usually lifts those budget caps whenever spending is near its limit, so that projection likely underestimates how much government will spend. With all the additional spending and debt accumulation, interest payments on the debt are expected to rise sharply.

This is the real danger: As interest payments go up, they consume a larger portion of the budget, leaving less room for Congress to spend money on popular programs or the military. Congress will be forced to raise taxes or borrow more money to pay the interest on the debt and avoid government default, which will in turn increase debt and make the interest payments even bigger. Then the cycle repeats itself ad nauseam until collapse.

Meanwhile, the CBO forecasts slower economic growth, averaging only 1.7 percent of GDP in the next decade. The cause is slower population growth and anticipated higher interest rates from the Federal Reserve.

All told, the slowing economy and rampant government spending mean that by 2029, the size of the debt, relative to the size of the economy, will grow to 93 percent. If that trend holds, shortly after that, the country’s national debt will be bigger than the entire U.S. economy.

Does anybody care? Numbers and statistics are boring. They don’t go viral. Celebrities don’t talk about them, and numbers as big as a trillion are impossible to wrap our minds around. But we need to care. If Congress does not control spending and these projections become reality, the country as we know it will end, and we’ll all be impoverished. (For more from the author of “Do People Care That the US Will Add $12 Trillion to the Debt in 10 Years, or Am I Wasting My Time Writing About It?” please click HERE)

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Beware: The Worldwide Debt Monster Is Rearing Its Ugly Head

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The self-proclaimed progressive wing of the Democratic Party still doesn’t get it, but plenty of reality-based people are finally realizing that debt levels in the U.S. and worldwide, public and private, have entered a serious danger zone.

CNN devoted considerable time this morning to Wednesday’s report that the official national debt at the end of 2018 was the tiniest hair short of $22 trillion, up a stunning 10 percent just in President Trump’s two years in office. Wednesday’s Wall Street Journal featured a special section devoted entirely to the American and world debt problems.

“The world has never had as much debt as it has right now – nearly $250 trillion,” reported the Journal. Worse, the “biggest borrowers” are “the U.S., China, the Eurozone and Japan, which [together] have more than two-thirds of the world’s household debt, three-quarters of corporate debt and nearly 80% of government debt.” . . .

The United States itself crawled out of the 2008-09 financial crisis by trying massive short-term deficit spending along with record-low interest rates. But with deficits already near record highs and interest rates still at levels low by historical standards, there’s no room left for fiscal or financial “stimulus” if things go bad here.

The numbers in the report are therefore quite worrisome. Total U.S. consumer debt (credit cards, student loans, etc.) looks likely to top a record $4 trillion this year. Mortgage debt is approaching its financial-crisis peak of $10.7 trillion. Average per-person credit-card debt stands at $6,826, up 11 percent since 2011. Car-loan average debt of $30,977 was “the highest for any third quarter on record.” Monthly payments on new-car loans also hit a record. Worst of all, “U.S. corporate debt has climbed to roughly 46% of gross domestic product, the highest on record.” (Read more from “Beware: The Worldwide Debt Monster Is Rearing Its Ugly Head” HERE)

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The National Debt Is the Punch Line

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An elderly gentleman walked into the bar last week and proceeded to tell me jokes.

The greatest joke-tellers can be reasonably assured that their jokes will wither and die with me, because I’m the world’s worst rememberer and re-teller of great jokes. I destroy good jokes, and it’s a shame, but I remember the punch lines.

So after the gentleman told me the one about the Murphy twins getting drunk and the one where the old man needs help to recall his wife’s name (Rose), he asked me if I’ve ever been to Europe.

I have been, but to keep him talking, I said I hadn’t, and he told me that the best place to live is France. “The government builds nice roads there, and you can go to college for free, and public transportation, why, they’ve got it down to a science over there,” he said.

I thought, “This is a joke, right?” I mean, come on.

“Everything you could ask for is taken care of; health care is terrific; in fact, it costs you nothing to stay at a hospital, unlike here where you’ll go to the poorhouse,” he continued. “Sure, they tax you at 50 percent, but your life is pretty much worry-free.”

I chuckled, thinking that was the punch line. Apparently this old socialist Democrat was not a consumer of the news of the recent riots in Paris due to high taxes. But I offered the fact that as someone about 40 years his junior, I am most worried about our debt.

“The debt has always been high; people have been complaining about the debt since I was 15,” he said.

“OK,” I thought, “this isn’t funny any more.” When he was 15, two parents didn’t have to work to support the family. When he was young, the nation was fighting and winning a world war and government debt was due to that. He was apparently unaware that our debt is due to accumulative massive spending on social programs and foolish intervention in the private sector.

So I countered that a trillion dollars is an unimaginable sum. He said, “So was a billion 30 years ago.” I said yes, but we owe upwards of $200 trillion in unfunded liabilities, to which he responded, “You should blame the president for giving those tax cuts to the rich.”

Are you kidding me? I’m not rude, so I just acted like I didn’t understand his point, rather than give him simple truths like, “We had those liabilities before Trump” and “You are benefiting from them” and “Congress has no plan to fix the shortfalls” and “They have extended us too far” and so on. He truly believes we should be taxed at 50 percent, and then everything will be hunky-dory.

As he got up to leave, I searched for a kind thing to say. “Well, you have a Merry Christmas, sir,” I said, and he laughed and said, “You too, thank you.” I thanked him for the great jokes, and he left.

I have thought a great deal about that meeting. I recalled that the answer to the debt that this socialist Democrat shared was exactly the same answer that was given to me by the first local Republican I met when I jumped into politics for the first time, ten years ago. “The debt has always been high.”

It’s like a punch line to a joke. Almost.

Then, cynically, I thought the old man could afford to think the way he did. His working years are over; he has Social Security and Medicare; and he chooses to live in America despite that it does not give him enough free stuff for his liking. I’m one of two and a half workers paying for his benefits. My back will still carry the increased consequences of high debt, and so will my children’s and their future children’s.

The debt-to-GDP ratio is near 100 percent and quickly reaching WWII levels, yet the Republicans are salivating over new infrastructure spending and the Democrats have their hearts set on Medicare for all and a global warming tax.

The government is closed because of a disagreement between two fiscally irresponsible parties about how to spend more money.

And the punch line is, “Don’t worry; the debt has always been high.” (For more from the author of “The National Debt Is the Punch Line” please click HERE)

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The Republican Congress Is Breaking Spending Records With Almost No Spending Cuts in Sight

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The Republican-controlled federal government is setting new records for blowing out the national debt, and substantial spending cuts don’t appear anywhere on the outgoing Congress’ radar. This week the government released two different statistics showing how rapidly the federal deficit is still growing.

The nonpartisan Congressional Budget Office’s monthly budget review for November 2018 found that that the first two months of fiscal year 2019 have yielded a deficit of $303 billion. On Thursday, the latest monthly report from the department of the Treasury showed that the deficit for the month of November 2018 alone was $205 billion — over $66 billion more than the same time last year.

With numbers this high this early in the fiscal year, the federal government will post a trillion-dollar deficit for the first time in its history quite easily before the end of this fiscal year in September, as the Committee for a Responsible Federal Government predicted back in March.

Meanwhile, the national debt clock is still growing, with a total just south of $22 trillion as of Friday morning.

Yet here we are at the end of the year, and you’d be hard-pressed to find any meaningful effort to cut government spending in the upcoming spending package.

Additionally, Republican leadership has even given up on the spending-related agenda items of defunding Planned Parenthood or placing modest work requirement reforms on the federal food stamp program in the nearly $900 billion farm bill that passed this week.

At this point, it appears that the only way congressional leadership might manage to save any taxpayer money in the ongoing year-end spending negotiations is if they fail to negotiate the $5 billion in funds President Trump has demanded for a southern border wall. (For more from the author of “The Republican Congress Is Breaking Spending Records With Almost No Spending Cuts in Sight” please click HERE)

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If We Don’t Cut Debt and Spending, the U.S. Is Poised for Another Financial Crisis

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. . .Here’s the thing about inflation and fighting it: In the short term, raising interest rates actually accelerates inflation. From April 1977 through April 1980, the Fed very cautiously raised interest rates, just a little at a time, hoping to gently rein in inflation. Instead, inflation took off like a bull out of a rodeo chute.

The Fed responded by accelerating interest rates with panicked leaps, adding as much as a percentage point a month for several months between 1980 and the peak in 1981. Interest rates on three-month Treasuries jumped from 7.07 percent in June 1980 to 16.30 percent in May 1981. . .

Picture this: There’s a stack of privately held money that’s almost as much as all the things that can be made and sold within a given year. The people who hold onto that money are content with keeping it in low-interest bank accounts, their mattress, or a safe. Sure, they might lose 2 percent of the value to inflation every year, but that’s more than worth it because the cash acts as a hedge against uncertainty.

The higher inflation gets, the more expensive it is to hold cash. High inflation makes it more likely that these stocks of money will be spent or converted to assets, pushing prices up even higher. It’s like a fire and it feeds on itself accelerating with panic buying. Only by paying recession-inducing higher interest rates on bonds and bank accounts can saving cash become economical.

Here’s where we are today: If everything goes according to plan, the Congressional Budget Office (CBO) calculates that, by 2020, more than half of all personal income taxes will be required to just service the national debt, and those interest payments will exceed our military budget. However, if inflation kicks off, we have much more privately held money sitting on the sidelines now than we did back in 1981. If people become afraid to hold cash because inflation is eating it up too quickly, the tsunami will be unstoppable. (Read more from “If We Don’t Cut Debt and Spending, the U.S. Is Poised for Another Financial Crisis” HERE)

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Drowning in Debt: These States Are Approaching a Point of No Return

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By Townhall. Having grown up in New Jersey, you understand that Democrats are a tax and spend party and even liberals in the state understand it. The Garden State is a case study in mass exodus; it’s just too expensive to live there anymore. Are there signs that the Democrats get it? Maybe—the heavily Democratic legislature in Trenton had to tell Governor Phil Murphy that his tax increase agenda was more or less not going to happen. Taxes still went up, but it was not the insane proposal the governor’s office had pushed. Still, I doubt Demorats in these states will find rational solution to their fiscal woes. After decades of irresponsibility, these states are approaching a day of reckoning. It’s the usual blue state madness crew: New Jersey, New York, Illinois, and California. For some, pension payments are a struggle (via Fox Business):

Connecticut may be the richest state in the country, on a per capita basis, but it’s racked up a sizable debt worth more than $53 billion – and it could be taxpayers who are forced to bail out the Constitution State, according to the former governor of Indiana.

. . .

And Connecticut isn’t the only state struggling with a debt crisis: California, Illinois, New Jersey and New York are unable to make pension payments to retired government workers.

(Read more from “Drowning in Debt: These States Are Approaching a Point of No Return” HERE)

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These American States are Drowning in ‘Irretrievable’ Debt

By Fox Business. Connecticut may be the richest state in the country, on a per capita basis, but it’s racked up a sizable debt worth more than $53 billion – and it could be taxpayers who are forced to bail out the Constitution State, according to the former governor of Indiana.

“Someone’s going to the barbershop,” Mitch Daniels, a Republican, said during an interview with FOX Business’ Stuart Varney on Thursday. “The first will be the taxpayers, already beleaguered in some of these states.” . . .

In Illinois, for instance, vendors wait months to be paid by a government that’s $30 billion in debt, and one whose bonds are just one notch above junk bond status, according to Daniels. New York’s more than $356 billion in debt; New Jersey more than $104 billion; and California more than $428 billion.

“They’re just one of a number of states, including some of the biggest states, that are in deep water,” Daniels said. “I think it is irretrievable. Pensions is the core of it. It’s not the only fiscal recklessness that they have practiced, but in some of those cases, the bill are genuinely unpayable.” (Read more from “These American States are Drowning in ‘Irretrievable’ Debt” HERE)

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U.S. Fiscal Year Deficit Widens to $666 Billion

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The U.S. budget deficit widened to $666 billion for the fiscal year 2017 as record spending more than offset record receipts, the Treasury Department said on Friday.

The 2017 deficit increased to 3.5 percent of gross domestic product. The previous fiscal year deficit was $586 billion, with a deficit-to-GDP ratio of 3.2 percent.

The latest fiscal year, which ended Sept. 30, straddled the presidencies of Barack Obama, a Democrat, and Donald Trump, a Republican.

Accounting for calendar adjustments, the 2017 fiscal year deficit was $644 billion compared with $546 billion the prior year.

Fiscal 2017 revenues increased 1 percent to $3.315 trillion, while spending rose 3 percent to $3.981 trillion. (Read more from “U.S. Fiscal Year Deficit Widens to $666 Billion” HERE)

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