Many of you viewers as well as many Wall Street professionals deep down inside believe that deficits do not really matter. We have almost always had deficita and we will almost always have deficits in the future. Big deal, deficits.
The reality is that the US governments deficit is so big and will be getting much much bigger as we have to borrow more and more each year to pay ever increasing medicare, social security and government pensions and benefits. Within three years the US government will need to borrow more than half of its total expenses, even if US pretax income of all income tax payers grows by 5% annually instead of the current below 3% nominal rate.
In other words, I expect that at some point after the world discovers that the US government has to borrow more than half of what it spends, the worlds lenders will say NO MAS!
Currently the US government scams the world for the $100 billion per month each year to cover its $300 billion per month budget. Since the US government only makes $200 billion from income and employment taxes, excise fees, etc. That $100 billion monthly gap is only going to get worse, much, much worse.
US government debt is currently just over $15 trillion. The present value of future expenditures for medicare, social security and government pensions is $60 trillion. That means total US Government debt is in reality $75 trillion.
To pay those future mandated expenses mean that in about eight years, the US government is going to have to find hundreds of billion to pay the additional $600 to $700 billion monthly.
Remember. pretax income for all who pay income taxes is currently $700 billion monthly. That means that within eight years we will have to raise and spend over $1 trillion each month on $700 billion month on entitlements; an amount equal to current total pretax income of $700 billion monthly.
Those who think that if only the US started to grow faster again, we could grow fast enough to eventually pay our bills. Wrong.
Pretax income would have to grow by over 20% each and every year for eight years to get to where US government income would pay for US government spending.
The problem with that is US pretax income has never grown by more than 10% per year let alone ever reach a 20% rate. There is no way the US economy can grow fast enough to pay our bills. Zip, nada, no way.
As I said earlier at some point within the next few years, the world will notice that the US government can never pay for what it spends. There is only possible outcome for an entity that perpetually spends more than it makes.
It is called bankruptcy.
Charles Biderman
President & CEO
TrimTabs Investment Research
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Charles Biderman is the Chief Executive Officer of
It would be interesting to analyze the financial effects of the bunkruptcy of the Federal Government (the value of the US dollar, federal lands, roads, shares of US corporations, etc.), as well as its effects on the different stakeholders – bondholders (US citizens as well as foreign governments), pensioners etc.
This porargm was enlightening. I learned a lot. I was shocked and amazed at how ignorant we all are of the true history of Money and the World. Most people dont understand, because they have been brainwashed into believing a lie and the Ascent of Money is the hard truth. The Truth as Winston Churchill once said, The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is.
Thanks for the candor along with a painless lesson of Economy 101. I have reason to believe there are those in government leadership along with other bureaucrats who possess healthy measures of common sense. In light of this, why is it government seems to be repeating the same behavior while expecting a different result? Yet, government has facilitated influx of many foreigners by embellishing their arrivals (whether by withheld taxation, granting citizenship to illegal aliens, or simply guaranteed employment) under the influence of Big business—so as to create brutal competition for already scarce jobs—thereby taking ZERO responsibilities for the economic hardships heartlessly bestowed on the American families who actually contribute to the economic outcome of the entire nation. Simple rule some learned as children—Play with fire and you may get burned…
Some children are brought up in a ‘shelter’ of non-accountability. That’s what we have for government leadership. Congratulations on painting yourselves into a corner called, BANKRUPTSY! Now we will all be equally broke–except for those perhaps with Swiss bank accounts…..