Prepare for a New, Less Affluent America – The Messenger

Perhaps the Fed, as a pragmatic matter, felt that it had no real choice but to keep interest rates low and take the path of least resistance. After all, the Treasury got a pass from all those years of low interest rates on its debt.

The eye-popping analyses in the Aspen reports describe some of the most immediate money problems the country faces. For example, the aging of the American population, along with a persistent drop in the birth rate, have created significant hurdles. People over 65 have increased from 12% to 17% of the populace in the last 20 years and are expected to reach 22% by 2050. Meanwhile, between 1976 and 2018, the mean number of offspring born per woman declined from three children to two.

In addition, rising health care expenses, together with everything else we are spending on, are expected to push the federal debt to 180% of GDP by 2053. The pace at which Medicare, Social Security, health care, and defense costs are rising is simply unsustainable.

The Aspen reports also describe how such large amounts of federal debt reduce the fiscal space for the country to be able to address temporary sudden domestic needs ranging from pandemics to wars. Apart from crowding out other non-government forms of debt, which also can have adverse impacts on the capital markets and private-sector economy, this also naturally limits the country s capacity to provide for its citizens.

The impact of the debt load on the country has put it in the unappetizing political and financial position of having to raise taxes or cut Social Security, Medicare and defense spending. Given the caliber of our current political leaders, the absence of any responsible sense of compromise, and the sheer enormity of the country s fiscal issues, we would be foolish to expect a solution anytime soon. The die seems cast.

We face the specter of diminished economic strength, higher taxes, fewer social services, and a weaker military in an ever-increasingly dangerous, inhospitable world.

Our economic chickens are coming home to roost. As they do, it won t matter which politician or party is responsible. In the end, we will have failed ourselves by allowing elected officials to get away with ignoring issues, decade after decade, that will threaten the quality of life of our children and our grandchildren.

via themessenger.com

Thomas P. Vartanian