The first link below details some of the draconian spending cuts that have been proposed by the new Conservative-Liberal Democrat coalition government in the UK. There will be big defense cuts (discussed in a previous blog), cuts in welfare, a raise in the retirement age and even the cutting of a half-million public jobs. The British public seems to have taken the news with a stiff upper lip. These are big budget cuts. In contrast, the French government proposed the rather mild measure of raising the retirement age to 62 and the French nation was paralyzed by strikes, demonstrations, work stoppages, etc. One wonders what will happen in France when serious budget cuts are required.
A USA Today editorial warned that the British austerity measures are “a pretty good road map of where US politicians will have to go if they’re serious about getting the budget near balance.” Notice the word “near” balance. The US budget deficit is so gigantic that even serious austerity measures will not produce a balanced federal budget in the USA. A cartoon in the Washington Post made the point very well that President Obama “doesn’t get it” concerning how badly austerity measures are needed in the USA to get the budget deficits under control. That cartoon is found in the third link below.
The first link reports that the British budget deficit (which has triggered such strong austerity measures in the UK) is $174 billion. There are now reports that the reckless mortgage practices in the US may need a $154 billion bail-out from Congress for Freddie and Fannie (see fourth link). If the economy worsens in the USA, that bailout could rise to $259 billion! It appears that the election in the USA in a week will produce a new US Congress which will be unwilling to give Obama any more humungous bailouts to rescue the big bankers and lending institutions from their own reckless actions, so expect some serious confrontations between a newly cost-conscious House of Representatives in the USA and the big-spending practices of the Obama administration.
Given that the US budget is far larger than the UK budget, austerity measures in the US that would rival the British austerity measures would need to approach $1 trillion per year! Is the American public ready for such cuts? They may have no choice. The rest of the world is growing very weary of the profligacy of the US federal government and the US Federal Reserve Board (as previous blogs have noted). What might some of the US budget cuts look like? The following is a list which I, a mere citizen, can generate. I’m sure readers will come up with many other cuts in their minds as well.
To approach $1 trillion in cuts per year, the US federal government would need prodigious cuts in its workforce (the UK is proposing about 500,000 such job cuts). The Afghan War would need to be shut down ASAP (insolvent nations can’t afford wars in far-off places that lack a strategic goal). The Defense Department would need to cut a large number of civilian employees and bring back the draft for filling all military pay-grades below the rank of Sergeant/NCO to slash its budget without cutting the size of the uniformed ranks even further. The Department of Education could be shut down completely, restoring to each state the responsibility of educating their own children as they see fit. Federal grants-in-aid to states and cities would need to be cut massively or eliminated entirely. States and cities would be required to adopt “pay as you go” budgets. The early retirement age for Social Security would need to be raised from 62 to 65 and the mandatory retirement age raised as well. Medicare costs would have to be reduced by having the government set all medical care treatment costs in the USA and require Big Pharma to give massive big volume discounts on prescription drugs to Medicare patients. Our list is just getting started!
All foreign aid except for humanitarian and military aid would need to be eliminated. All federal funding for all non-defense university research projects and subsidies for NPR and the National Endowments of the Arts and Humanities would need to cease. All “double-dipping” by federal retirees would need to stop. The Agriculture Dept. would need to end all farm subsidies for all commodity producers except for truly small family farms. Recent media reports revealed that federal salaries are far higher than private industry salaries, so the high federal salaries would need to be dramatically cut to the private-sector levels. Congress would have to stop the hypocritical practice of exempting itself from its own laws, end Congressional junkets abroad and end the Congressional Retirement program for all past and current Congresspeople. There would be no more federal subsidies for Presidential libraries. Under President Eisenhower (a Republican), the top income tax bracket required high-end earners to pay 91% of their income to the government (see last link). The top income tax bracket would have to rise substantially to cut the federal budget deficit.
Are Americans ready for these kinds of spending cuts and tax increases? If not, we may need to get ready. At some point the rest of the world will enforce such budgetary discipline on the USA via a collapsing US dollar, mass dumping of US Treasury Bonds or the gradual transference of international trade settlements into currencies other than the US dollar. The US government has been spending profligately on the assumption that it can endlessly defy the economic law of Proverbs 22:7 without paying any penalty. As some point, no amount of phony statistics or financial sleight-of-hand will keep the current system afloat. When economic crunch time comes, the prophecy of Revelation 17-18 that Babylon the Great’s monetary/financial system will collapse in the latter days will either be fulfilled or will approach its fulfillment.
Are you ready for this? I suggest you read my free article, Should Christians Prepare for Coming Hard Times?, available by clicking at the Articles tab at this website. At some point in the future, you will run out of time to prepare. The USA cannot live in a financial fantasyland forever.