Well, we sure picked a hell of a time to attend college and try to land a job. Our parents and previous generations have been busy selling us down the river, placing us under a crushing mountain of debt we may spend our working lives digging out of.
The era of state socialism that began under Bismarck is coming to an end, trampled by overextended entitlements and profligate spending. If you aren’t familiar with the phrases pension reform, sovereign default or entitlement crisis, do not fret, as you will soon get sick of hearing them.
I’m talking about the $3 trillion pension gap faced collectively by the American states, the fact that Social Security liabilities now exceed inflows (the huge surplus was spent by the Feds- oops!) and staggering future liabilities in Medicare. The U.S. only collects enough money organically (via taxes) to cover less than a third of its outlays.
The on-budget debt stands at $12.7 trillion while the off-budget debt of the two trust funds- Social Security and Medicare- in unfunded liabilities is estimated at about $75 trillion this year.
We have passed the point of no return in regards to entitlements- it is politically impossible to cut them although they are unsustainable so they will simply end in a U.S. default or hyperinflation. Since most entitlements are pegged to inflation, a default seems more likely.
Bulls point to a stock market up 80 percent from its lows a year ago and a slight uptick in employment figures. On closer inspection, the economic picture isn’t very rosy.
Food stamp usage just hit a record 39 million people- the 14th consecutive monthly increase and 158,000 personal bankruptcies were filed in March. The previous record over the last five years was 133,000 in October. Foreclosure activity hit a record 932,234 properties in the first quarter.
The employment picture remains grim with the official unemployment rate hovering just under 10 percent with 14 million out of work. There is no driver for jobs and there is likely to be none for a long time- it may take decades for a full jobs recovery.
No matter how much money the Feds throw around the economy, it cannot recover until non-collectable debts are written off. Bailing out the banks simply delays and worsens the day of reckoning. For all their talk of “affordable housing” the Feds are doing everything they can to make it unaffordable.
Housing prices need to fall and the Federal Reserve must stop blowing bubbles by manipulating interest rates. The charade must end- zombie banks need to fail, states need to go bankrupt to slim down and renegotiate pensions and the federal government needs to get smaller and interfere less with the economy.
In short, we need a free market where the government doesn’t pick winners and losers. Bringing an end to our futile and insanely expensive wars wouldn’t hurt either. Good luck out there- the next few years are shaping up to be very interesting.
Timothy Heacock is a senior majoring in finance and economics. He may be contacted at firstname.lastname@example.org.