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I was just reading some articles about the national debt, state debt, local debt, auto loan debt, student loan debt, mortgage debt and unfunded pension liabilities and it just seems like something doesn't add up at all.
Not to mention the additional Social Security and Medicare needed as the baby boomers age. The oldest baby boomers are 70 right now and retirement age is 66 which means that only about a quarter of the boomers have started collecting.
I have noticed as of late that most people are trying to live the Home and Garden lifestyle where houses and cars must have all the bells and whistles.
Many public sector employees are close to retirement age, which means not only will they being paying those unfunded liabilities but they will need to have new government employees.
You have to loo at the debts and see whether they are problematic or not:
national debt: Our GDP is sufficient to maintain these debt levels for now. If our productivity goes to hell, then there will be a problem. That's very unlikely.... and even if it were to happen, the nationanl debt won't be even close to the biggest problem.
state debt: There are many states that this is a problem for. Especially those with low GDP.
local debt: Local governments are typically covered by the state. There's enough safety nets in place for this not to impact the rest of nation.
auto loan debt: Not really a problem. Auto loans have collateral and aren't just given out to anybody. The risk is on the lender... and worst case is that a lender who took on too much risk goes out of business.
student loan debt: Not really a problem. There's systematic ways in place to cover student loan debt. For example, the federal government has already put safety nets in place for these types of loans.
mortgage debt: Perhaps the biggest issue is that banks won't be able to recover funds from forclosed homes. This is actually a real problem because of the sheer number of loans out there and the impact it can have on the economy. However, in the long-term, real estate prices will continue to rise.
unfunded pension liabilities: These are not as massive as people think. It can take out a few big companies, but not enough to rock the entire economy.
State and local debt is the biggest problem at the moment. If you raise taxes to pay it down, all the rich people and big employers move to lower tax states. Your local economy does a Flint. Layer on the unfunded pension liability problem and many states are screwed. At the moment, states can't go bankrupt. I figure it's only a matter of time before that law changes.
The other big "debt" problem is the Social Security Trust Fund. That money has already been spent. The program is cash flow negative. Over the next decade, the Federal government either needs to raise taxes to keep the program cash flow neutral or it will start piling up debt and slash other Federal programs to keep sending those checks to retirees. Retirees vote so touching the program is the political third rail. I figure we will bump along for a decade doing nothing before anything happens. Rich people and corporations owned by rich people won't want to pay the higher taxes. Nobody will support cutting benefits. It's going to be a mess.
The national debt is about 80% of the GDP. After WWII it was over 100% and we coped and recovered from that nicely in the 50s and 60s.
Personal debt such as credit cards, auto loans, mortgages, student loans has been relatively low since 2008 and is just now returning to the be recession levels.
Plenty of States and local governments have overspent. That is certainly true where I live. It is way past time to rein in excess and wasteful spending. Corruption and cronyism seem to get in the way. Perhaps financial necessity is not such a bad thing. Unfortunately States and local governments seem to strike back and try to make the public unhappy. It seems that the first cuts are always parks, recreation and things that don't save money but impact the general public. I would agree with those that take the view that the average citizen is all but disenfranchised and we need some serious reforms.
I don't see any of these as bubbles that are going to burst and devastate the economy.
The national debt is about 80% of the GDP. After WWII it was over 100% and we coped and recovered from that nicely in the 50s and 60s.
Personal debt such as credit cards, auto loans, mortgages, student loans has been relatively low since 2008 and is just now returning to the be recession levels.
Plenty of States and local governments have overspent. That is certainly true where I live. It is way past time to rein in excess and wasteful spending. Corruption and cronyism seem to get in the way. Perhaps financial necessity is not such a bad thing. Unfortunately States and local governments seem to strike back and try to make the public unhappy. It seems that the first cuts are always parks, recreation and things that don't save money but impact the general public. I would agree with those that take the view that the average citizen is all but disenfranchised and we need some serious reforms.
I don't see any of these as bubbles that are going to burst and devastate the economy.
Government debt is about 100%
By the time Obama leaves the office it'll be well over $20T!
I doubt you will see any bubble 'pop'. What happens is it costs more and more to carry the debt so resources that were used for public good are used just to maintain the budget. At the local, state, and eventually national levels there will be higher taxes with less real projects and service for the public. Empires don't pop, they crumble.
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