But none of that really matters. There is only one issue, only one number in this country that matters, all other issues are trivial relative to this one issue/one number. And neither Biden nor Trump, Republicans nor Democrats, paid any attention to this issue in the Presidential campaign. Only one national political party and only one national Presidential candidate realized the critical nature of this issue and number and she didn't get elected.
And the one issue, the only number that matters in this country today is this: $125,000,000,000,000. For those counting at home, that number is $125 TRILLION. That is a conservative estimate of the total debt that the American political/criminal class has burdened the American taxpayer with today. [Note: testimony at a recent Congressional hearing put this number above $140 TRILLION but let's stay conservative for this discussion at $125 TRILLION.] This is the amount of current debt and estimated future unfunded financial liabilities that have been incurred at the city, state, and Federal levels of government.
Now, $125 TRILLION is a LOT of money. Consider:
- If you had spent $1,000,000 a DAY since the day Christ was born, you would still not have spent $1 TRILLION. And we are facing a $125 TRILLION debt.
- For those of you who falsely think that any problem can be solved by taxing the rich more, think again. For example, the estimated total wealth of the richest American today, Jeff Bezos, is about $175 billion. Let’s assume we do not raise his tax rate, let’s assume we confiscate everything he owns, sell it off and use the proceeds to pay off some debt. If that could be done, the total amount of debt that could be paid off would be about .14%. Not 14%, not 1.4%, but just.14%, an exercise in futility.
- In fact, the Federal Reserve Board just published its annual wealth forecast. The Fed estimates that the total wealth of EVERY American comes out to about $123 TRILLION. In other words, if you liquidated the wealth of EVERY American and used the proceeds to pay off debt, you still couldn't pay off $125 TRILLION.
- Every man, woman, and child in this country would have to write a check for almost $400,000 EACH to pay off the debt, meaning that a family of four would have to write a check for about $1.6 million.
In fact, that debt bubble has likely already started to spring some leaks. Like minor tremors that rumble before a major earthquake hits, there are minor financial death spirals that are already underway in cities and states across the country. It is my prediction that within 3-4 years a major U.S. city will declare bankruptcy. And this city could be big enough to dethrone Detroit who currently holds the dubious title, “Largest American city to ever go bankrupt.”
And I believe that city will be Chicago. It is highly likely that Chicago is already in a self feeding, financial death spiral, given the following conditions:
- For years the city experienced an outflow of residents and businesses out of the city because of high taxes and crime.
- In fact, the mayor, Lori Lightfoot, recently met with and literally begged business leaders not to leave the city.
- As this migration out of the city has grown, the tax base has shrunk which has reduced the tax stream which has placed pressure on the city’s annual budget needs.
- This has resulted in pressure to raise taxes even more and make cuts to city government services such as police, fire, EMT, sanitation, and schools.
- It was recently estimated that the city already faces about a $1 billion tax revenue shortfall for fiscal 2021 even though the year has just started.
- And since the city is having trouble meeting current year costs and expenses, it cannot devote any money to paying down its unfunded future liabilities.
- And these liabilities are substantial, with the “official” government accounting process estimating that the city has $42 billion in unfunded future liabilities.
- But a real world accounting of the future unfunded liabilities puts the real number at $76.5 billion (or about a $28,000 debt burden for every man, woman and child living in the city).
- In the mean time, violent crime in the city has skyrocketed, with murders up about 60% the past year allowing the city to continue to be the “murder capital” of the country.
- High and rising taxes, high and rising crime rates, more and more unfunded liabilities coming due, and lower government services will contribute to more out migration of residents and businesses which will reduce the tax stream which will require more taxation and more cuts to services and the financial death spiral is in place.
But while Chicago probably has the lead today regarding going bankrupt, there is some stiff competition for that distinction. Other cities, New York City, San Francisco, Los Angeles, Portland, and others are close behind. All of these cities face the same problems: residents and businesses moving out, taking jobs and tax revenue with them, quickly rising crime rates, cuts to city services which reduce the quality of city life for residents and businesses, massive amounts of unfunded financial liabilities, etc. Which one will make it to the bankruptcy courthouse steps first is still open for debate.
And Chicago is unlikely to get any substantial help from its state government since the state government of Illinois is, in my view, going to be the first U.S. state to ever go bankrupt. Now, here is a legal position that says that a state cannot declare bankruptcy but that is really just a technicality. When a state has far more costs, expenses and liabilities than the revenue and assets to cover it, it is in a state of de facto bankruptcy even if the strict legal definition of bankruptcy cannot be applied.
Illinois faces the same problems that Chicago does:
- In any study of population migration, the state of Illinois is always a top three state as far as losing residents and businesses no matter how you measure migration.
- Like Chicago, the state also has outrageously high unfunded future financial liabilities.
- The official estimate of Illinois state government unfunded financial liabilities is $196 billion but using real accounting principles vs. government accounting principles we see the real level of unfunded liabilities is $327 billion (a debt burden of over $25,000 for every man, woman, and child living in the state), all of which will become due in the coming years, putting more pressure on the already difficult to fund annual costs and expense streams.
- This year over year out migration reduces the tax base and tax stream requiring more taxes and fewer government services which reduces the quality of life which results in more out migration and the state level financial death spiral has begun.
- Several years ago the state was so strapped for funds that while it continued to sell state lottery tickets it stopped paying winners of the state lottery while also finding it difficult to fund ammunition for the state’s law enforcement officers.
And while these mini-financial death spirals are already underway across the country, the Federal government is not doing much better:
- Medicare Part A will officially go bankrupt in 2026, i.e. the Part A “trust fund” will be officially depleted.
- This means that it will theoretically no longer officially be able to pay 100% of the promised benefits.
- A similar situation exists with Social Security, its “trust fund” will officially be depleted by 2035 which means it theoretically will no longer be able to pay 100% of the promised benefits.
- But this is all just government semantics, Medicare and Social Security have been essentially bankrupt for years since they annually pay out far more in benefits than they collect in specific taxes to fund the programs.
- In fact, you can make a case that the Social Security trust fund went bankrupt back in the 1960s when the Washington political class took an actuarially sound retirement system, raided its accumulated wealth, and replaced it with the biggest Ponzi scheme in the history of humanity.
- But the worse news is there is estimated to be at least $80 TRILLION in unfunded Social Security and Medicare liabilities that will become due in the coming years as Baby Boomers retire and age.
- This $80 TRILLION will become part of the Federal government’s annual expense stream over the years which will likely add more debt to the current $27+ TRILLION national debt.
- As Social Security and Medicare payments take up more and more of the Federal government budget, pressure will rise to either raise taxes or reduce benefits or do both to cover the ever widening annual budget deficit.
- But reducing benefits will hurt the financial living standards and medical support for retired and disabled Americans.
- Raising taxes will, as this almost always does, reduce economic growth and vitality and the promised/expected gain from raising taxes will never materialize as it never does.
- Thus, despite raising taxes and reducing benefits, the debt bubble will continue to expand as unfunded liabilities become due, which will put pressure on the Federal Reserve to start printing money to reduce the Federal government’s ever growing annual budget deficit and national debt load.
- But printing money is never the long term answer since it will decimate the savings plans of retired Americans, it will decimate economic growth and worse of all, it will start an upward spiral of inflation which eventually turns into hyperinflation.
- At this point the cost of financing the debt will also skyrocket which will make borrowing money to fund the debt more expensive.
- As the dollar gets weaker and weaker as a result of hyperinflation and the printing of money, at some point the world will turn away from the American dollar as the currency of choice and replace it with another currency, likely the Chinese Yuan, a seismic shift that will further decimate the dollar’s value.
- At some point the currency collapses, the economy collapses, and our democracy collapses, making us a footnote in history along the hyperinflation disasters of the Weimar Republic and current day Venezuela.
Biden was part of a Presidential administration that added almost as much debt to the national debt as the previous 43 Presidential administrations COMBINED. He was part of a Presidential administration that incurred the first trillion dollar annual Federal budget deficit and that was then repeated three more times. He was part of a Presidential administration that saw the Federal debt to GDP ratio jump about 50% higher than the long term trend and became the first Presidential administration in 66 years to see that raito exceed 100%, something that happened for four years in a row, a dubious debt record that has never happened before.
As far as Nancy Pelosi and Kamala Harris are concerned, they not only come from California, a state highly likely to go bankrupt in the near future, they both hail from San Francisco, a city highly likely to go bankrupt in the near future. The national debt is 11 times higher than it was when Nancy Pelosi first came to Congress. So to think they have the ability to avert a debt bubble explosion at the national level is a fool’s folly.
So if you are happy Biden probably will be the next President enjoy it today, because given the huge debt burden facing the country, your victory is surely a short term, empty victory at best. If you are a Trump supporter, enjoy today because from a debt perspective it is not likely to get any better any time soon, if ever. Without drastic action immediately, the debt bubble will burst at some point and everything else that seems important today will be washed away in a sea of red ink in the not too distant future.
Listen for those tremors...and watch the mini-death spirals as they unfold in Chicago, Illinois and elsewhere for a leading indicator of when the big one will hit. Happy new year!
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