America’s Coming Fiscal Cliff of January 2013, Part I
America’s Coming Fiscal Cliff- January 2013
America is heading for a financial disaster such as never happened to any nation in the world before, and it will affect every man, woman and child in our once great country. Like a ship going over the precipitous cliff of the mighty Niagara Falls in New York, with tons of water plunging every second, America is surely heading for the Fiscal Cliff of January 2013. It is now impossible to paddle up the rapids to safety as America is caught up in a maelstrom of mounting and deadly debts.
Fed chairman Ben Bernanke and many economic writers all agree that the US Gov’t is heading for a fiscal cliff beginning next year, as the Bush-era tax cuts will automatically be phased out, resulting in higher taxation and sequestration (automatic budget cuts) to our military budget and entitlements such as Social Security, Medicare, and Medicaid! In a few short months and like in a horror movie, America will be heading for a fiscal cliff of apocalyptic proportions. Fiscal cliff is a term that describes the grave government financial danger coming to America in 2013. It is like the Sword of Damocles ready to fall on our nation. It will also affect the entire world as many nations are holding vast amounts of US Treasury debt and the US$, both fast losing their values!
How America Got Into Such A Great Financial Bind
America’s fiscal cliff has been in the making for many decades already, fueled by the reckless and uncontrollable spending of the US Congress; even borrowing money from other countries to pay for our national programs. In July 2011, America reached its previously agreed upon debt limit set by Congress of $15.3 trillion. There was a big squabble between both houses in Congress to rein in the national debt. A compromise was made to raise the US debt limit to $15.7 trillion on the provision that an appointed Super Committee of 12 Democrat and Republican congressmen, would draft up a plan in three months to cut $1.2 trillion in spending over the next 10 years- $109 billion per year! The committee’s deadline came shortly before Thanksgiving Day 2011, but it failed to come up with a comprehensive plan. Meanwhile Congress passed a contingent bill, the Budget Control Act of 2011 that mandates the phase out of the Bush-era tax cuts, and the sequestration of spending in the military and civilian agencies, and social services programs. Unless postponed by Congress after their forthcoming election, America’s fiscal cliff will come in January 2013!
America’s National Dilemma- Runaway Debt and Deficits
Presently, America is between the proverbial ‘rock and a hard place’. If our lame duck Congress does not act right after the Nov 2012 election, then the sequestration goes into effect with significant cuts in military and domestic spending, along with a sharp rise in personal taxes. This will surely cause America to go into a deeper recession with a forecast of a million jobs lost over the next two years. But if Congress acts and overrides the cuts, then our national debt will rise sharply. The US$, the world’s reserve currency, will continue to lose value and be worth less! Higher inflation would then kick-in, commodities and gasoline prices will increase sharply, interest rates would soar, and our national debt will continue to rise inexorably! The huge US debt will eventually bring on an economic collapse to America, and even to the rest of the world!
America is now faced with a great financial dilemma as our national debt is in a runaway mode, recently hitting $16 trillion. In only 5 years, it has doubled and is equal to over $50,000 for every man, woman, and child in this country. America’s dilemma is that there is precious little Congress can now do to prevent this coming disaster! It is feared that by allowing taxes to increase and the automatic spending cuts to take place, a great recession or a Greater Depression than in the 1930s will result! It took the US over 200 years (until 1982) to reach a $1 trillion in debt. But for each year during the past 4 years, the US national debt has risen by over $1 trillion per year! If Congress acts in the next three months and overturns its Budget Control Act and resorts to more quantitative easing (QE), our national debt crisis will be further exacerbated, and further bring our nation into penury! America’s day of reckoning is just around the corner with ‘nowhere to run, and nowhere to hide’!
What is Debt, and the Nature of Debt? America’s Unproductive Debt
When a person borrows money from a lender, a debt is created, and all debts once created must be repaid! It is either repaid by the borrower, or in the case of a default, by the lender. The lender ‘eats the loan’ and pays for the loan out of ‘his own pocket’. The Bible states ‘..the borrower is servant to the lender’ Pr22:7. America will cause her many large lenders like China, India, and Japan to ‘eat our debt’. One solution to heavy indebtedness is to lower one’s standard of living- to spend less and sacrifice more. Another solution is to default on the debt. This is exactly what is happening to America; we owe too much and can’t repay our debts! Our standard of living and way of life will be greatly affected and reduced!
America has been increasing debt at an alarming and unsustainable rate. If debt is created to improve income stream, then it would be productive debt and okay, i.e. such as to borrow to start a business to make money, and/or to make a living; or to leverage one’s assets by borrowing to invest in an income-producing property or a value-appreciation investment to make more money. But debt incurred for consumption, especially for conspicuous or lavish consumption, is generally unproductive, debilitating and destructive. This is what happened to America- spending more than we can afford, and borrowing more than we can ever pay back, without any additional income stream to ameliorate or contain our huge unpayable debt! After many decades of uncontrollable debt, this is why America will fall over a fiscal cliff of our own making in 2013 and taking all of us down with her!
A Brief Lesson on the Life Cycles of Great Nations
Ecclesiates1:9 states ‘..there is no new thing under the sun’, meaning what has happened before can and will happen again! Some historians agree that the average life cycle of a great nation is only about 200 years. There are unique patterns and cycles that make a once great nation fall. The people all began quite humble, working hard and harmoniously together. They cared for each other. But later they became lazy, and dependent upon others to carry the load; immorality proliferated, corruption prevailed, and collapse eventually occurred, and a dictator arose.
Here is a truism attributed to Alexander Fraser Tytler 200 years ago. ‘A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves generous benefits from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years’.
America is now 225 years old, based upon our Constitution written in 1787. Thus, America fits the above model perfectly: Vote for the congressmen that can give us the most benefits. Forget about how we will pay for them, forget who will pay for them, and forget about our children and the future of America. Thus, it is no surprise that America is losing its world-class status and becoming like a third world nation! In the glory days of the Rome, there was a saying ‘All Roads Lead to Rome’! The Roman Empire fell due to corruption and hedonism, where even their money was devalued by shaving their gold and silver coins. At the height of the British Empire in the 19th century, because of her many colonies worldwide, it was said that ‘The Sun Never Sets on the British Empire’. Today, Britain is no longer a superpower, with a national debt to GDP of 450%. America was once known as ‘The Land of Golden Opportunity’, but not any longer! America’s debt to GDP has now surpassed 100%. America is broke and near bankruptcy!
End of Part I. To be continued soon…
Posted on September 24, 2012, in America's Coming Fiscal Cliff and tagged Big Spending Cuts In the Military & Civilian Programs, Budget Act of 2011, Lame Duck Congress, Nowhere to Run- Nowhere to Hide, Our National Debt- Whose to Blame, Recession & Depression Coming, Runaway budget deficit & debt, Sharp Rise in Taxation, Sword of Damocles, The Nature of Debt, The Sad State of the United States. Bookmark the permalink. 2 Comments.