Government Cash Handouts Now Top Tax Revenues

U.S. households are now getting more in cash handouts from the government than they are paying in taxes for the first time since the Great Depression.

Households received $2.3 trillion in some kind of government support in 2010. That includes expanded unemployment benefits, as well as payments for Social Security, Medicare, Medicaid, and stimulus spending, among other things.

But that’s more than the $2.2 trillion households paid in taxes, an amount that has slumped largely due to the recession, according to an analysis by the Fiscal Times.

Also, an estimated 59% of the 308.7 million Americans in this country get at least one federal benefit, according to the Census Bureau, based on 2009 data. An estimated 46.5 million get Social Security; 42.6 million get Medicare; 42.4 million get Medicaid; 36.1 million get food stamps; 12.4 million get housing subsidies; and 3.2 million get Veterans' benefits.

And the handouts from the government have been growing. Government cash handouts account for a whopping 79% of household growth since 2007, even as household tax payments--for things like the income and payroll tax, among other taxes--have fallen by $312 billion.

That is a tough feeding trough to take away from voters.

One of the recurring themes FOX Business has been covering is “how the world has been turned upside down – well, the business world at least,” notes FOX Director of Business News, Ray Hennessey. “In a free market, profit is generated by hard work and enterprise," Hennessey notes, adding: “Because of the labor of the worker, companies generally have the ability to prosper and make more money, both for their employees and their owners," which in turn creates tax revenues.

Seems like common sense, right? That’s because it is. But not in our country today. Somehow the DNA of our country is changing. Wealth creation is coming from DC, not from America’s entrepreneurs.

In short, Americans have the government, not private enterprise, to thank for their wealth growth.

Obviously, there are big implications to this.

For instance, Hennessey asks, if indeed more households have the government to thank for their wealth, does that mean those households are more inclined to re-elect politicians who are pushing for more government handouts?

Does the workforce erode because it is easier to collect a check than answer to an alarm clock each morning?

Is our competitiveness as a nation hurt because profit is generated not by American capitalism but by European-style socialism? Can we, as taxpayers, afford to carry the burden of government-sponsored wealth creation?

All this comes at a time when a growing number of Wall Street houses, including JPMorgan Chase (JPM: 44.68, +0.12, +0.27%) and Barclays Capital (BCS: 19.71, +0.33, +1.70%), Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS) are cutting their U.S. GDP growth forecasts by as much as a percentage point or more.

It also comes as President Barack Obama is already in re-election mode, as he bets his massive spending will woo independents. It also comes as Standard & Poor’s has joined the International Monetary Fund and Pimco, which runs the world’s biggest bond fund, in downgrading their outlook on US debt.

The negative outlook comes as the government has added the equivalent of Germany and Russia combined in spending from the time Democrat Rep. Nancy Pelosi gaveled in as House Speaker in January 2007. The government, like never before, has put the thumb on the scale as it picks winners and losers.

Yes, the dollar rallied and Treasuries bounced higher after the news that S&P had issued a negative outlook on the U.S. debt picture. Some argued that happened because eventual austerity would slow growth, which is deflationary and in turn good for bonds.

But that ignores the flight away from rocky overseas markets toward the Treasury's safe haven status, which drives yields down. Potential sovereign debt defaults are a huge problem in the Eurozone, particularly in Greece, where yields rocketed above 13% earlier this week.

The bullish view about U.S. bond prices also ignores the fact that the Federal Reserve has been buying Treasury bonds and notes, $600 billion so far this year, more than half of the Treasury Dept.'s issuance. That keeps a lid on bond yields. When bond prices rise, the government doesn't have to lure investors with higher yields. When bond prices fall, the government offers higher yields to reel investors in.

The bullish view about U.S. bond prices also ignores the negative trend in the dollar, which has been weakening.

And it ignores the bond market’s brutal reaction to spending under President Bill Clinton, where yields spiked several percentage points higher beginning in 1994, rising from around 5% before topping out above 8%, before then-Treasury Secretary Robert Rubin forced austerity, leading to welfare reform.

Republicans now want to shrink the U.S. government, but Democrats want to stymie their efforts. This, after the President touted $38 billion in spending cuts as the largest in our nation’s history, just four months or so after touting the massive spending increase pushed through in the lame duck Congressional session.

And after the White House shelved the Bowles-Simpson debt commission report, a panel which the President asked for, endorsed and then ignored, hoping such hard decisions might be delayed until after the election.

President Obama had asked for the debt commission to "address the long-term quandary of a government that continually and extravagantly spends more than it takes in," only to initially set aside the commission's recommendations.

And earlier this year the White House first introduced a budget that would have added $6.7 trillion more in deficit spending over the next 10 years, yanking the national debt higher to more than 75% of gross domestic product, according to the Congressional Budget Office. That, until GOP Rep. Paul Ryan offered his $4.4 trillion in spending cuts over ten years, causing the President to offer $4 trillion in cuts over 12 years.

The Fiscal Times reports that “the only other time government income support exceeded taxes paid was from 1931 to 1936.” The Times notes that “government transfers of income to households started to overtake personal taxes at the start of 2008, and the gap has been widening.”

The difference between what households received and what they paid in taxes is about $125 billion, equal to a little more than “three times the amount Republicans and Democrats agreed to cut from government spending through Sept. 30,” the Fiscal Times said. Typically, the gap between government transfers and taxes runs the other way, the Times reports.

“In normal times the household sector gives about eight percentage points more of its income in taxes than it receives in direct transfers,” the Times quotes J.P. Morgan economist Michael Feroli as saying, adding that a return to normalcy, or this eight-percentage-point spread, is equal to about $1.2 trillion in income.

So the question is: What government policies will bring the U.S. labor market back to robust health, enough to drive economic growth, consumer spending -- and higher tax revenues?

When will the U.S. government pull back from its intervention into the U.S. economy, so the economy can try to stand on its own?

http://www.foxbusiness.com/markets/2011/04/20/government-cash-handouts-exceed-tax-revenues/#ixzz1KGUOuyOn

$6 Gas? Could Happen if Dollar Keeps Getting Weaker

A dollar plumbing three-year lows is hitting Americans squarely in the gas tank, and one economist thinks it could drive prices as high as $6 a gallon or more by summertime under the right conditions.

With the greenback coming under increased pressure from Federal Reserve policies and investor appetite for more risk, there seems little direction but up for commodity prices, in particular energy and metals.

Weakness in the US currency feeds upward pressure on commodities, which are priced in dollars and thus come at a discount on the foreign markets.

One result has been a surge higher in gasoline prices to nearly $4 a gallon before the summer driving season even starts, a trend that economists say will be aggravated as demand increases and the summer storm season threatens to disrupt oil supplies.

"All we have to have is a couple badly placed hurricanes which could constrain some of the refinery output capacity in some key locations," says Richard Hastings, strategist at Global Hunter Securities in Charlotte, N.C. "If you get weakness in the dollar concurrent with the strong driving season concurrent with the impact of one or two hurricanes in the wrong place, prices could go up in a quasi-exponential manner."

Using a model that combines "subtle rates of change" with movements in the dollar index [.DXY 74.14 0.14 (+0.2%) ] and commodity prices, Hastings figures the low dollar is responsible for about one-third, or $1.31, of the total gas-at-the-pump cost. Regular unleaded Wednesday was $3.84 a gallon nationwide, according to AAA.

While there's far from unanimity about the dollar's future course, the proportionate contribution that currency weakness makes to oil prices is clear.

The dollar as measured against a basket of foreign currencies has dropped 6 percent this year, while regular unleaded gasoline is up about 28 percent.

Gas prices also have been boosted from turmoil in the Middle East which in turn has triggered a wave of speculation that traders estimate has added about $15 or so to the cost of a barrel of crude [CLCV1 112.29 --- UNCH (0) ], which is now teetering above the $110 mark.

Hastings sees gasoline having "no problem" getting to $6.50 a gallon over the summer after increased demand and storm disruptions come into play.

Others, though, say gasoline prices haven't needed any help so far from other events—the moves by the Fed to keep interest rates in negative real terms are enough to boost energy by themselves.

Michael Pento, senior economist at Euro Pacific Capital in New York, says there is an almost perfect negative correlation between the falling dollar and oil prices—minus-0.9 to be exact.

"When you have negative correlations that strong, it's not hard to understand that the reason why we're having this price spike in commodities is primarily because of the weaker currency and not because of shortages of oil or international tensions or global growth," Pento says.

The assertion from Hastings that the weak dollar is responsible for one-third of the total cost for a gallon of gas "sounds very low," Pento says, adding that a barrel of oil should be closer to the $65 to $70 range if priced properly.

"That's exactly where it would be if we weren't crumbling our currency," he says.

Should events follow their current course, sharply higher gas prices will burden consumers further as they also cope with the rise in food costs this year.

Hastings projects the dollar index to test 72 at some point—another 3 percent drop—while Peter Cardillo, chief economist at Avalon Partners in New York, sees the dollar dropping to the 73.50 level.

"The global economy is quite strong, and the weak dollar is basically fueling even higher energy prices. That's not transitory," Cardillo says. "Gas prices in the Northeast are over $4 a gallon. How could anyone say that's not a burden?"

http://www.cnbc.com/id/42683030

RAHN: Job and liberty destroyers

Which two have done more to improve your life - Thomas Edison and Steve Jobs, or Barack Obama and Nancy Pelosi? Some people, in their pursuit of profit, benefit their fellow humans by creating new or better goods and services, and then by employing others. We call such people entrepreneurs and productive workers. Others are parasites who suck the blood and energy away from the productive. Such people are most often found in government.

Perhaps the most vivid description of what happens to a society where the parasites become so numerous and powerful that they destroy their productive hosts is Ayn Rand’s classic novel “Atlas Shrugged.” The just-released movie version is an entertaining, tension-filled struggle between the productive and the parasites who ally themselves with the envious and evil. Go see it.

When wages are rising faster than inflation (i.e., real wages), and the number of adults as a percentage of the population at work is rising, times are good; but when real wages fall, misery results. For the past several months, real wages have been falling, and despite the small improvement in the unemployment rate, the adult population/worker ratio continues to fall. Declines in prosperity most often are a result of bad policies rather than natural forces, with the rare exception of an event like the Japanese earthquake and tsunami.

Bad policies come about from the actions of specific people - individuals in Congress and government agencies - not the Congress or the administration as a whole. Washington is filled with people who are more destructive than constructive. It is useful to name some of the most destructive people in the hope that they will either reform or leave.

One of Washington’s most aggressive destroyers of jobs has been Rep. Barney Frank, the Massachusetts Democrat who is a former head of the House Financial Services Committee and principal author of the now-notorious Dodd-Frank Act. He was one of main protectors and enablers of Fannie Mae and Freddie Mac as they went on their ruinous, subprime mortgage buying binge. Peter Wallison, former general counsel of the U.S. Treasury and member of the Financial Crisis Inquiry Commission, has produced a lengthy report showing how the actions of Fannie and Freddie were the most important causes of the financial crisis. If Mr. Frank and his Senate counterpart, disgraced former Sen. Christopher J. Dodd, Connecticut Democrat, had acted responsibly, millions of Americans might not have lost their jobs and homes over the past few years.

Interior Secretary Kenneth L. Salazar, a former senator, has done more to destroy and curtail American oil, gas and coal production than any other single human. Soon after taking office, he prohibited oil and gas production in huge areas of the American West. He has held up the permitting of both offshore and onshore oil production well beyond what was necessary to ensure safety. He has ignored sound science and the rule of law. His actions, even according to Democrat senators and others, have cost hundreds of thousands of American jobs.

Health and Human Services Secretary Kathleen Sebelius was caught in a half-trillion-dollar lie last month, when, before a House Committee, she was finally forced to admit that the administration had been double-counting Medicare savings as critics had been claiming. If Ms. Sebelius and others in the administration had told the truth, Obamacare would never have passed. The costs associated with this piece of legislation, not even considering the costs of all of the legal challenges, will result in millions of job losses and a loss of personal and economic freedom - unless the Supreme Court upholds the legal challenges. President Obama claimed last week in his budget speech that hundreds of billions of dollars can be saved in the Medicare program by eliminating waste, fraud and abuse. If that is true, why has he tolerated Ms. Sebelius’ mismanagement?

Sen. Carl Levin, Michigan Democrat, has done much to drive foreign investment and jobs out of America. He has done this by leading a headline-grabbing, but economically illiterate, crusade against legal tax avoiders, tax evaders and low-tax jurisdictions. His destructive “solution” has been to put costly and punitive restrictions on domestic and foreign financial institutions. These restrictions have caused some foreign financial institutions to cease investing in the United States and to refuse opening accounts for Americans. It has been explained to Mr. Levin that his previous and newly proposed legislation is driving upwards of $1 trillion of foreign investment out of the country, which will cause Treasury to lose, in the real world, many times the tax revenue Mr. Levin and his gang of know-nothings claim. But Mr. Levin carries on, leaving America with far less foreign investment and the jobs it would create - all in a selfish attempt to curry favor with the witless media.

Finally, we have the job-destroyer-in-chief, Mr. Obama. Even though the empirical evidence shows that both job creation and liberty increase with reductions in the size of government and tax rates, the president has done just the opposite. Last week, without offering an alternative budget plan of his own, the president had the unmitigated gall to attack House Budget Committee Chairman Paul Ryan, who has a serious plan to deal with the budget crisis. However, Mr. Obama did call for a big tax increase on those who create jobs. If that happens, prepare for double-digit unemployment.

http://www.washingtontimes.com/news/2011/apr/18/job-and-liberty-destroyers/?sms_ss=email&at_xt=4dadf175b0ab455f%2C0

Is Delaware a taker or a maker?

Hot in the news recently is the claim that the U.S. has become a nation of takers, not makers. The claim is based primarily on the fact that today in America there are nearly twice as many people working for the government than in manufacturing. Has Delaware also become a taker rather than a maker? The answer is mixed.

YES

First, Delaware has gone from 1.4 manufacturing jobs per government job in 1970 to 0.4 manufacturing jobs today. The ratio for all goods production jobs (manufacturing, agriculture, forestry, mining, construction, utilities) relative to government employment has dropped from 2.0 to 0.9 over the same time period.

Second, Delaware's economy has become far more dependent upon Federal transfer payments. Transfer payments have soared from 6.5% to 18.8% of Delaware personal income over 40 years. The major acceleration has been in Medicare and Medicaid transfers. Government transfer payments for healthcare have gone from 28% to 91% of Delaware health industry earnings.

Retirement (Social Security) and disability transfers have risen from 3.7% to 6.7% of Delaware personal income and the pace is increasing.

Federal government grants and other payments to state and local government in Delaware have increased from 2.6% to 4.7% of Delaware personal income. Defense department payroll and contracts equal 3.3% of the state's personal income.

Third, the average compensation of government employees in Delaware over the 40 years has risen from 83% of the average compensation throughout the state to 109%. State and local government has gone from 91% to 103%. And this is despite the fact that over the past decade or more there has been essentially no increase in state and local government productivity in Delaware. Nor has productivity changed significantly in the government revenue dependent Delaware hospitals.

NO

First, due to extraordinary gains in manufacturing productivity, employment growth in Delaware and the U.S. over the last 40 years has been concentrated in services. To claim that this is a step backward is to assert that information services and neurosurgeons do not add value. Over the past decade or so productivity (output per worker) in information services in Delaware has risen 115% and productivity in the state's large finance and insurance industry is up 41%.

Second, government's (Federal, military, state, local) share of total Delaware employment has fallen over 40 years from 18% to 14%, although state and local government's share has remained steady.

Third, state and local government taxes and Federal taxes have fallen as a percent of Delaware personal income over the four decades.

What is the bottom line? Increased dependent on the flow of funds out of Washington, D.C. at a time when national government debt is soaring is risky. To avoid increased dependency on the solvency and largess of the Federal government, Delaware needs to focus upon growing industries with high rates of productivity and productivity growth...regardless of whether those industries are in the production of goods or the provision of services. And to have public schools that graduate workers with the skills necessary to be enhance productivity.

Dr. John E. Stapleford, Director

Center for Economic Policy and Analysis

johnstapleford@caesarrodney.org

http://campaign.r20.constantcontact.com/render?llr=44scqeeab&v=0019vIjpnfVUZ88p-0rq8T7GQ11gscN7xUJTHRl3i7EGwRaX6qXdxS5IDcpoVITEgHmBvWZj73dsytk1zeTSQc_nNhyRnhH0V3I3mLTA-z921CRkgXSGiZvNA%3D%3D

World Bank president: 'One shock away from crisis'

Robert Zoellick cited rising food prices as the main threat to poor nations who risk "losing a generation".

He was speaking in Washington at the end of the spring meetings of the World Bank and International Monetary Fund.

Meanwhile, G20 finance chiefs, who also met in Washington, pledged financial support to help new governments in the Middle East and North Africa.

Mr Zoellick said such support was vital.

"The crisis in the Middle East and North Africa underscores how we need to put the conclusions from our latest world development report into practice. The report highlighted the importance of citizen security, justice and jobs," he said.

He also called for the World Bank to act quickly to support reforms in the region.

"Waiting for the situation to stabilise will mean lost opportunities. In revolutionary moments the status quo is not a winning hand."

At the Washington meetings, turmoil in the Middle East, volatile oil prices and high unemployment were also discussed.

IMF chief Dominique Strauss-Kahn raised particular concerns about high levels of unemployment among young people.

"It's probably too much to say that it's a jobless recovery, but it's certainly a recovery with not enough jobs," he said.

"Especially because of youth unemployment... there is now a risk that this will be turned into a life sentence, and that there is a possibility of a lost generation," he said.

http://www.bbc.co.uk/news/business-13108166

Maryland Legislature Kills Wind Energy Plan; Delaware Lawmakers Encouraged to Scrutinize Similar Initiatives in First State

Dover - Maryland Governor Martin O'Malley and wind energy advocates suffered a devastating defeat last week as the Maryland Legislature rejected the "centerpiece" of the Governor's environmental agenda, a plan to build the nation's first offshore wind farms in the Atlantic Ocean.

Governor O'Malley, a Democrat, was unable to convince fellow Democrats, who control both the House and Senate in Maryland, that increasing the state's commitment to wind energy was a wise investment.

According to the Washington Post, O'Malley personally lobbied Maryland lawmakers hard to pass his plan, but legislators shelved the proposal, calling for further study later this year. (See

http://www.washingtonpost.com/blogs/maryland-politics/post/sources-say-omalleys-offshore-wind-bill-shelved-with-study/2011/04/07/AFH4zWwC_blog.html).

A coalition of environmentalists and unions also lobbied for the $1.5 billon proposal, arguing that construction of the massive turbines would bring 2,000 jobs or more to the state, as well as make Maryland a leader in green energy.

According to the Post, the plan ran into significant opposition from both Republicans and Democrats in the Legislature, who said they had too many unanswered questions about the potential costs on the state's electric ratepayers.

Under a complicated set of steps laid out in the bill, the state would require Maryland utilities to sign 25-year agreements to buy offshore wind power at a price far above the current market rate. The subsidy would go to developers of the offshore wind farm who say they could not secure financing for the project otherwise. The cost would be spread among all residential and commercial customers through a monthly fee on electric bills.

For most residential customers the cost was estimated between $1.44 to $3.61 a month, for large companies and municipalities the surcharge could add up to 2 percent of their bills, or tens of thousands of dollars monthly.

David T. Stevenson, the Director of the Caesar Rodney Institute's Center for Energy Competitiveness in Dover, said Delaware legislators should heed the warnings raised by their Maryland neighbors over the costs of wind power and other alternative energy sources:

"Maryland legislators showed great prudence and courage to stand up to their Governor's reckless environmental schemes. Rather than just continue to "go with the flow," these legislators exhibited true leadership. They took a second look at the costs of these proposals and looked out for the best interest of Maryland's taxpayers, businesses and rate payers."

"Delaware legislators have a similar opportunity with HB 86."

"By suspending Delaware's participation in the costly and ineffective state level cap a trade scheme known as RGGI, our legislators can deliver a similar victory for the people of Delaware."

"We should embrace effective, fiscally responsible plans for clean and efficient energy production. But, as Maryland legislators recognized, there's a difference between political rhetoric and the real world. Grand environmental plans may make Governors and other politicians feel good about themselves, allowing them to trumpet their 'commitment' to our planet. But costly boondoggles, like RGGI and Atlantic wind farms, don't deserve legislative support," Stevenson said.

http://campaign.r20.constantcontact.com/render?llr=44scqeeab&v=001zmrtXGWWEwZhQ9Iue0hvXhmYLmwzzGjp4JCQ00173oRJlSpHvRFfD8dYIN0dc7t0XeGJ93lSgIFvuq00ZtjfVd-dQ1wwyo1rDgUSBXy9XNoFlSSqBMuzfQ%3D%3D

Delaware housing: Home prices slide in all three counties; sales in NCCo, Kent down from year ago

The average price of homes sold in Delaware continued to slide in March as the beginning of prime selling season got under way.

Total sales were off in two counties -- New Castle fell from 368 homes in March 2010 to 328 last month, a 10.8 percent drop-off; and Kent went from 101 homes to 68 last month, a 32.6 percent fall.

In Sussex County, however, 159 homes were sold, topping last March's total of 128.

In New Castle County, the average sales price for new and existing homes fell from $229,000 last March to $216,000, a 5.6 percent drop. Kent sales prices fell from $186,000 to $178,000, off 3.9 percent; and Sussex dropped from $323,000 to $296,000, off 8.4 percent.

Recent housing figures have shown the market also is struggling nationally. Sales of existing homes decreased 9.6 percent in February. Distressed properties accounted for 39 percent of all sales, and 33 percent were cash transactions, the National Association of Realtors said.

About 1.8 million homes that are delinquent or in foreclosure loom as additional supply, according to CoreLogic. The so-called shadow inventory amounted to a nine-month supply of properties as of January, about the same as a year earlier, the real-estate data service said in a report.

There was an 8.6-month supply of homes for sale on the open market in February, the Realtors association reported.

http://www.delawareonline.com/apps/pbcs.dll/article?AID=/201104160345/BUSINESS/104160310

On the Backs of America’s Small Businesses? That’s No Way to Solve America’s Deficit Crisis

Do we need a serious solution to fix America’s growing deficit crisis? Absolutely.

Should it be done on the backs of America’s small business owners? Absolutely not.

Unfortunately, that’s the path that the President has chosen in the deficit plan he released earlier today.

It’s the same “tax the rich” rhetoric that was used last year. We opposed that flawed policy then — and we oppose it now.

Those so-called “rich” are actually America’s small business owners who we’re dependent on to lead us to economic prosperity. Proposals, such as Congressman Paul Ryan’s Path for Prosperity, aim to prevent tax hikes on small businesses – who file as individuals – so that our nation’s economic recovery isn’t stopped dead in its track.

Don’t take our word for it — even the President’s own Small Business Administration points out that “75% of small businesses file taxes on individual income tax forms.”

America’s small businesses have generated 64% of net new jobs in this country over the past 15 years — and they employ more than half of all private sector employees. Raise taxes on employers, and you’ll only diminish job growth. That means less tax revenue — and an even deeper deficit hole.

Our problem isn’t that we tax small businesses too little — it’s that our government spends too much.

It’s time for a serious deficit plan to rein in government waste, reform our entitlement spending, and empower — not burden — our small business owners, much like what Congressman Ryan has proposed we do. Support these common-sense proposals now.

If, as the President said, consensus is for the American Dream, there’s no room in this debate for budget plans that would tax the dreamers out of business.

Sincerely,


Bill Miller
Senior Vice President and National Political Director
U.S. Chamber of Commerce

5 Things That Will Happen To You When America Goes Bankrupt

"Madness is rare in individuals - but in groups, parties, nations, and ages it is the rule." -- Friedrich Nietzsche

By John Hawkins - Does it seem too strong to call the way America deals with its debt "madness?" If not madness, then what? Denial? An addiction? However you phrase it, we're a country that's in deep trouble, but so many of us seem unable to deal with it.

Liberals in this country, for the most part, will admit that we're running up "unsustainable" deficits. Yet, these same liberals adamantly oppose any and all serious efforts to do anything about it. Once you move out from liberals to the general public, once again you'll find plenty of people who admit that this nation has a huge problem. Yet, when you leave generalities, get down to specifics, and start looking for programs to cut, then suddenly everyone gets nervous and says, "never mind." It's like the old saying, "Everyone wants to go to heaven, but no one wants to die."

Sadly, this is a natural outgrowth of ladling out public funds to special interests. There is so much collective money that few people feel or appreciate it when even billions are saved. Yet, if we yank even a few million away from special interest groups like PBS, Planned Parenthood, or the unions, they squeal like pigs that are about to accidentally be put in the wolves' pen at the zoo.

In the face of that, people have to realize that this country is on pace to go bankrupt -- and it could happen relatively soon if we don't start taking serious steps to control our spending. Mike Pence thinks we could just be ten to fifteen years away. Tom Coburn is less optimistic and thinks it could happen in as little as five years. If that happens, we're not a tiny country like Greece -- we're the biggest economy in the world. That means there's no cavalry coming to pay our bills for us because we ARE the cavalry.

What happens then? Well, we don't know for sure, but we can make some educated guesses about what COULD happen and how it will impact YOUR life.

1) Your life savings could be reduced to nothing almost overnight. Inflation is a fact of life. As Thomas Sowell has noted, "As of 1998, a $100 bill would not buy as much as a $20 bill would buy in the 1960's." That's under normal circumstances.

However, the thing governments have traditionally done when they simply can't pay their debts is print more money. The problem with this is the further you expand the money supply, the less the money you already have on hand is worth. This can wipe out the savings of a lifetime in a relatively short period. Imagine spending billions of dollars just to buy a loaf of bread. Sound far-fetched? Well, guess what? That has happened in the Weimar Republic, which was crushed under debts from WWI and decided to pay it off by printing more money. It could happen here, too, and all the money you've scrimped and saved could become worthless in a short order.

2) Your taxes will skyrocket. We've been conned into thinking that we can fund a massive government on the backs of the rich. This is simply not so. It's not working today and it's not going to happen in the future. We cannot tax the rich enough to pay off our debt or even enough to keep the government going long-term. Even if we could, the rich have the resources to flee the country for greener pastures if they're being taxed into oblivion. The middle class? Not so much.

What that means is the more desperate the government gets, the more the average American is going to be hammered with new taxes. How much more of your income can you afford to send overseas to pay China for the money they've loaned us to keep PBS, Planned Parenthood, and the National Endowment of the Arts going? What about if the country goes bankrupt and your income tax rate shoots up fifty percent? How are you going to pay your mortgage? How are you going to feed your kids? When the government runs out of cash and it can't borrow any more money, then it will start leveling massive taxes on the American people.

3) Your life could be in danger. If the government goes bankrupt, you'll have an extremely angry, confused, and frustrated populace that has little faith in its leaders -- combined with a horrific economy and a reduced ability of the government to keep order. Under those circumstances, widespread rioting and violent crime seem entirely plausible.

When Argentina had its crisis, violence went up 142% and "young men began looting supermarkets."

Here's some of what happened during the German hyperinflation of the currency in Weimar Republic after it started printing money night and day,

The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug.

4) Your payments from the government will dramatically decrease or stop altogether. Contrary to what some people believe, Medicare and Social Security are paid out of the same fund that pays for everything else. In other words, if the government goes bankrupt, there is no money set aside to pay for these programs. So, if you're receiving Social Security, Medicare, welfare, food stamps, or any other similar programs, those checks could stop or be slashed down to nothing. That seems unthinkable to people, but if the government doesn't have any money, then it can't pay it out to people. As they say, "You can't get blood out of a turnip."

5) You will have a dramatically reduced standard of living. If taxes and inflation escalate dramatically, both of which are very likely if we go bankrupt, economic activity will slow to a crawl and we'll go into a depression. We're not talking about a "This is the worst economy since the Depression" situation that we hear every time there's a mild downturn in the economy; we're talking about a REAL depression. Businesses will close left and right, the stock market will tank, unemployment will soar to heights not seen since the thirties, and the government won't be in a position to help very much.

If that happens in a country like America, where people have been so prosperous for so long, it's going to produce utter misery. It's not a lot of fun to be poor under the best of circumstances, but it's much worse to go from having a comfortable life with a bright future to growing vegetables to eat in the backyard and wondering how you're going to keep warm in the winter.

http://townhall.com/columnists/johnhawkins/2011/04/12/5_things_that_will_happen_to_you_when_america_goes_bankrupt/page/2

Big government on the brink

Here is exactly how the U.S. is engaging in economic suicide.

We in America have created suicidal government; the threatened federal shutdown and stubborn budget deficits are but symptoms. By suicidal, I mean that government has promised more than it can realistically deliver and, as a result, repeatedly disappoints by providing less than people expect or jeopardizing what they already have. But government can’t easily correct its excesses, because Americans depend on it for so much that any effort to change the status arouses a firestorm of opposition that virtually ensures defeat. Government’s very expansion has brought it into disrepute, paralyzed politics and impeded it from acting in the national interest.

Gore-Backed Car Firm Gets Large U.S. Loan

Here's another great example of stealing from the poor to give to the rich. Folks struggling with the worst economy in decades will have their tax money used to build products they can never buy.

It is also very unlikely that electric cars will become mass market. Battery power will never equal the power density of liquid fuel.

In addition, Toyota and others are building hybrids with no subsidies. Why do these small untested companies deserve our money?

WASHINGTON -- A tiny car company backed by former Vice President Al Gore has just gotten a $529 million U.S. government loan to help build a hybrid sports car in Finland that will sell for about $89,000.

The award this week to California startup Fisker Automotive Inc. follows a $465 million government loan to Tesla Motors Inc., purveyors of a $109,000 British-built electric Roadster. Tesla is a California startup focusing on all-electric vehicles, with a number of celebrity endorsements that is backed by investors that have contributed to Democratic campaigns.

The awards to Fisker and Tesla have prompted concern from companies that have had their bids for loans rejected, and criticism from groups that question why vehicles aimed at the wealthiest customers are getting loans subsidized by taxpayers.

"This is not for average Americans," said Leslie Paige, a spokeswoman for Citizens Against Government Waste, an anti-tax group in Washington. "This is for people to put something in their driveway that is a conversation piece. It's status symbol thing."

DOE officials spent months working with Fisker on its application, touring its Irvine, Calif., and Pontiac, Mich., facilities and test-driving prototypes.

Matt Rogers, who oversees the department's loan programs as a senior adviser to Energy Secretary Steven Chu, said Fisker was awarded the loan after a "detailed technical review" that concluded the company could eventually deliver a highly fuel-efficient hybrid car to a mass audience. Fisker said most of its DOE loan will be used to finance U.S. production of a $40,000 family sedan that has yet to be designed.

"It's the ability to drive significant change in fuel economy across a large market segment" that swayed the department to approve the Fisker loan, Mr. Rogers said. "We got quite excited."

Henrik Fisker, who designed cars for BMW, Aston Martin and Tesla before starting his Fisker Automotive in 2007, said his goal is to build the first plug-in electric hybrids that won't sacrifice the luxury, performance and looks of traditional gas-powered luxury cars.

The Karma will target an exclusive audience -- Gore was one of the first to sign up for one. Mr. Fisker says all new technology starts out being expensive. He pointed to flat-screen televisions that once started at $25,000 but are now affordable to the mass market.

The four-door Karma, powered by a lithium-ion battery, will be able to run solely on electric power for 50 miles, and will achieve an average fuel economy of 100 mpg over the span of a year, the company says. Production is scheduled to start in December, with about 15,000 vehicles a year expected to hit the U.S. market starting next June.

Many of the 1,500 people who have made deposits on the Karma are former BMW and Mercedes owners who want an environmentally friendly car without sacrificing luxury, Mr. Fisker said.

He said he pitched the Karma to Mr. Gore at an event hosted by KPCB last year, and that the former vice president almost immediately submitted a down payment for the car.

Kalee Kreider, a spokeswoman for Mr. Gore, confirmed that the former vice president backs Fisker and purchased a Karma. "He believes that a global shift of the automobile fleet toward electric vehicles, accompanying a shift toward renewable-energy generation, represents an important part of a sensible strategy for solving the climate crisis," she said in a statement.

Fisker's top investors include Kleiner Perkins Caufield & Byers, a veteran Silicon Valley venture-capital firm of which Gore is a partner. Employees of KPCB have donated more than $2.2 million to political campaigns, mostly for Democrats, including President Barack Obama and Hillary Clinton, according to the Center for Responsive Politics, a nonpartisan group that tracks campaign contributions.

Officials at Kleiner Perkins didn't return requests for comment.

Asked whether Mr. Gore had any influence on Fisker's application, the DOE's Rogers said, "None at all."

"This is a very attractive, very across-party-lines kind of vehicle," Mr. Rogers said. "All of the detailed due diligence [was] done by independent review teams."

Other Fisker investors include Eco-Drive (Capital) Partners LLC, an investment consortium, and Qatar Investment Authority, a state-run investor based in Qatar.

Fisker's government loans will come from a $25 billion program established by Congress in 2007 to help auto makers invest in the technology to meet a new congressional mandate to improve fuel efficiency. In June, the DOE awarded the first $8 billion from the program to Ford Motor Co., Nissan Motor Co., and Tesla, which are all developing electric cars.

Some companies that have been turned down for loans from DOE say they did not get much feedback from the department about their applications. O. John Coletti, president of EcoMotors International of Troy, Mich., said his company applied for a $20 million loan from the agency last December, and last month got a one-page rejection letter from the loan program's director, Lachlan Seward. EcoMotors' lead investor is Vinod Khosla, himself a former Kleiner Perkins partner and a longtime campaign contributor to Republicans and Democrats alike.

"I don't have an issue with the winners … it's possible somebody has better ideas than us," Mr. Coletti said. At the same time, he said, "More feedback from DOE on a timely basis would be wonderful. When you're running a business you'd like to know whether you're going to be able to take advantage of this opportunity."

Mr. Coletti's company -- which makes diesel engines and is still waiting to hear from the Department on a separate loan application to help it build a manufacturing facility -- isn't without politically well-connected patrons, either. Its major investor is Vinod Khosla, himself a former Kleiner Perkins partner who has donated to campaigns.

Scott Redmond, CEO of XP Vehicles Inc., said he met with DOE officials twice in Washington after applying for a $40 million loan to develop a $15,000 to $25,000 hybrid, and that both times he was told his application looked good. Since receiving a rejection letter from DOE in August, Redmond said, he has been unable to get a full explanation as to why his request was turned down.

Mr. Rogers said he was not at liberty to discuss individual applications that had been turned down, but said the process has been handled fairly and objectively.

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