“In order to keep the government functioning, Congress just increased the federal debt ceiling to $12.5 trillion. And the party isn’t over yet.

“In an effort to keep mortgage interest rates low, the Fed pledged this month to buy yet another $500 billion of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) guaranteed mortgage securities.

“But all that spending has a price. And the bill is about to come due.”

This is a n article you cannot afford to miss - it you were not frightened already, you will be by the time you finish reading it.

http://moneymorning.com/2009/12/30/u.s.-debt/

Technorati Tags: fannie mae, freddie mac, national debt, Obama, the Fed, us debt

Under current law, the federal budget is on an unsustainable path—meaning that federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds longterm fiscal projections, rising costs for health care and the aging of the U.S. population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits and accumulating debt. Keeping deficits and debt from reaching levels that would cause substantial harm to the economy would require increasing revenues significantly as a percentage of gross domestic product (GDP), decreasing projected spending sharply, or some combination of the two.

For decades, spending on the federal government’s major health care programs, Medicare and Medicaid, has been growing faster than the economy (as has health care spending in the private sector).

The Congressional Budget Office (CBO) projects that if current laws do not change, federal spending on Medicare and Medicaid combined will grow from roughly 5 percent of GDP today to almost 10 percent by 2035 (what this report describes as the intermediate term) and to more than 17 percent by 2080 (what this report considers to be the long term).

That projection means that in 2080, without changes in policy, the federal government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years. (For a description of CBO’s projection methodology, see the June 2009 background paper CBO’s Long-Term Model: An Overview.)

Under current law, spending on Social Security is also projected to rise over time as a share of GDP, albeit much less dramatically. CBO projects that Social Security spending will increase from less than 5 percent of GDP today to about 6 percent in 2035 and then roughly stabilize at that level through 2080. Under the assumptions used for CBO’s long-term projections, government spending on activities other than Medicare, Medicaid, Social Security, and interest on federal debt—activities such as national defense and a wide variety of domestic programs—is projected to decline or stay roughly stable as a share of GDP in future decades. Almost all of the projected growth in federal spending other than interest payments on the debt comes from growth in spending on the three largest entitlement programs—Medicare, Medicaid, and Social Security.

By CBO’s estimates, the increase in spending for Medicare and Medicaid as a share of GDP will account for 80 percent of spending increases for the three entitlement programs between now and 2035 and 90 percent of spending growth between now and 2080. Thus, reducing overall government spending relative to what would occur under current fiscal policy would require fundamental changes in the trajectory of federal health spending. Slowing the growth rate of outlays for Medicare and Medicaid is the central long-term challenge for federal fiscal policy.

Federal spending on Medicare, Medicaid, and Social Security will grow relative to the economy both because health care spending per beneficiary is projected to increase and because the population is aging. Spending on Medicare and Medicaid will be driven by both factors, while Social Security spending will rise because of the population’s aging. Between now and 2035, aging is projected to make the larger contribution to the growth of spending for those three programs as a share of GDP. After 2035, continued increases in health care spending per beneficiary are projected to dominate the growth in spending for the three programs.

The current recession has little effect on long-term projections of noninterest spending and revenues. But CBO estimates that in fiscal years 2009 and 2010, the federal government will record its largest budget deficits as a share of GDP since shortly after World War II.

As a result of those deficits, federal debt held by the public will soar from 41 percent of GDP at the end of fiscal year 2008 to 60 percent at the end of fiscal year 2010. Higher debt results in permanently higher spending to pay interest on that debt (unless the debt is later paid off ). Federal interest payments already amount to more than 1 percent of GDP; unless current law changes, that share would rise to 2.5 percent by 2020.

CBO’s long-term budget projections raise fundamental questions about economic sustainability. If outlays grew as projected and revenues did not rise at a corresponding rate, annual deficits would climb and federal debt would grow significantly. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress income growth in the United States. Over time, the accumulation of debt would seriously harm the economy. Alternatively, if spending grew as projected and taxes were raised in tandem, tax rates would have to reach levels never seen in the United States.

High tax rates would slow the growth of the economy, making the spending burden harder to bear. Policymakers could mitigate the economic damage from rapidly rising debt by putting the nation on a sustainable fiscal course, which would require some combination of lower spending and higher revenues than the amounts now projected. Making such changes sooner rather than later would lessen the risks that current fiscal policy poses to the economy.

Source: http://cbo.gov/ftpdocs/102xx/doc10297/SummaryforWeb_LTBO.pdf

The Congressional Budget Office shouts out the same critical warnings that so-called “radicals” like Glenn Beck repeat. Americans, it’s time for you to dust off your ancestors’ backbones and take your country back before it is too late.

Technorati Tags: congressional budget office, obamacare, unsustainable American debt

“They’re printing money out of thin air, but there’s no value behind it.”

Hold on to you saddles, folks… it’s going to get MUCH worse.

Technorati Tags: economic depression, federal reserve, financial depression, inflation, the Fed

In the face of the modern liberal assault on Constitution-based values, an attack that has steadily snowballed since President Roosevelt’s New Deal of the 1930s and resulted in a federal government that is a massive, unaccountable conglomerate, the time for re-enforcing the intellectual and practical case for conservatism is now. Conservative beliefs in individual freedoms do in the end stand for liberty for all Americans, while liberal dictates lead to the breakdown of civilized society — in short, tyranny. Looking back to look to the future, Levin writes “conservatism is the antidote to tyranny precisely because its principles are our founding principles.”

In a series of powerful essays, Levin lays out how conservatives can counter the liberal corrosion that has filtered into every timely issue affecting our daily lives, from the economy to health care, global warming, immigration, and more — and illustrates how change, as seen through the conservative lens, is always prudent, and always an enhancement to individual freedom.

As provocative, well-reasoned, robust, and informed as his on-air commentary, Levin’s narrative will galvanize readers to begin a new era in conservative thinking and action. Liberty and Tyranny provides a philosophical, historical, and practical framework for revitalizing the conservative vision and ensuring the preservation of American society.

Technorati Tags: Mark Levin - Liberty and Tyranny: A Conservative Manife

Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, , by Thomas Woods

In his New York Times bestseller, Meltdown, Woods shows how this new bailout (just like last year’s bailout) will quickly drive our nation deeper into recession. Woods lays the blame for our economic woes squarely on the shoulders of the true culprits: gutless politicians, greedy lobbyists, and The Federal Reserve System. It was The Fed—not the free market—that allowed ambitious bureaucrats and politicians to pull the strings of our financial sector, manipulate the value of money, and plunge our economy into crisis.

Here’s part two of this dynamic program:

Technorati Tags: austrian economic school, thomas woods, tom woods

Tom Woods, the author of Meltdown, on Glenn Beck’s FOX show, February 9, 2009

Offering the first free-market perspective on—and answers to—the financial calamity, Meltdown proves:

* How the government and the media created the myth that this crisis is so complicated that people should not question the government’s response but leave it up to the “experts.”

* That no amount of government regulation or “brilliant” politician can fix a broken system—a new system is the best solution.

* How politicians and the media refuse to talk about the role of the Federal Reserve in this crisis, but it is at the heart of the problem.

* The media has created the myth that we need a “new New Deal” to get out of this crisis.

* The cold truth that capitalism isn’t the culprit—the government is.

If you want to understand what caused the financial meltdown—and why none of the current big-government solutions will work—Meltdown explains it all.

Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, , by Thomas Woods

In his New York Times bestseller, Meltdown, Woods shows how this new bailout (just like last year’s bailout) will quickly drive our nation deeper into recession. Woods lays the blame for our economic woes squarely on the shoulders of the true culprits: gutless politicians, greedy lobbyists, and The Federal Reserve System. It was The Fed—not the free market—that allowed ambitious bureaucrats and politicians to pull the strings of our financial sector, manipulate the value of money, and plunge our economy into crisis.

Technorati Tags: austrian economics, austrian school, federal reserve, glen beck, meltdown, the Fed, tom woods

Prime Minister, I see you’ve already mastered the essential craft of the European politician, namely the ability to say one thing in this chamber and a very different thing to your home electorate. You’ve spoken here about free trade, and amen to that.

Who would have guessed, listening to you just now, that you were the author of the phrase ‘British jobs for British workers’ and that you have subsidised, where you have not nationalized outright, swathes of our economy, including the car industry and many of the banks?

Perhaps you would have more moral authority in this house if your actions matched your words? Perhaps you would have more legitimacy in the councils of the world if the United Kingdom were not going into this recession in the worst condition of any G20 country?

The truth, Prime Minister, is that you have run out of our money. The country as a whole is now in negative equity. Every British child is born owing around £20,000. Servicing the interest on that debt is going to cost more than educating the child. Now, once again today you try to spread the blame around; you spoke about an international recession, international crisis. Well, it is true that we are all sailing together into the squalls. But not every vessel in the convoy is in the same dilapidated condition. Other ships used the good years to caulk their hulls and clear their rigging; in other words – to pay off debt. But you used the good years to raise borrowing yet further. As a consequence, under your captaincy, our hull is pressed deep into the water line under the accumulated weight of your debt

We are now running a deficit that touches 10% of GDP, an almost unbelievable figure. More than Pakistan, more than Hungary; countries where the IMF have already been called in. Now, it’s not that you’re not apologising; like everyone else I have long accepted that you’re pathologically incapable of accepting responsibility for these things. It’s that you’re carrying on, wilfully worsening our situation, wantonly spending what little we have left. Last year - in the last twelve months – a hundred thousand private sector jobs have been lost and yet you created thirty thousand public sector jobs.

Prime Minister, you cannot carry on for ever squeezing the productive bit of the economy in order to fund an unprecedented engorgement of the unproductive bit. You cannot spend your way out of recession or borrow your way out of debt. And when you repeat, in that wooden and perfunctory way, that our situation is better than others, that we’re ‘well-placed to weather the storm’, I have to tell you that you sound like a Brezhnev-era apparatchik giving the party line. You know, and we know, and you know that we know that it’s nonsense!

Everyone knows that Britain is worse off than any other country as we go into these hard times. The IMF has said so; the European Commission has said so; the markets have said so – which is why our currency has devalued by thirty percent. And soon the voters too will get their chance to say so. They can see what the markets have already seen: that you are the devalued Prime Minister of a devalued government.

Daniel Hannan’s blog

Technorati Tags: daniel hannan

I was hoping to have a little more notice, but my interview with St. Louis NPR affiliate KWMU on foreclosures is airing today. In fact, it has already aired twice this morning at 6:35am and 8:35am. The final airing will be this afternoon, April 1st (and no this is not a joke), at 4:45pm. If you missed it, or just can’t wait to hear it, its already up on the KWMU website.

It seems that the story ended up airing only locally in St. Louis instead of going national, but its still great to get the chance to be on air. I hope you can check it out.

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Ever since the “American Recovery and Reinvestment Act of 2009 (aka The Stimulus Bill) was passed in February, many homebuyers have been trying to figure out what this means for them. Sure an $8,000 tax credit is great, but how do you get and how do you qualify?Here is a brief rundown of the main points of interest:

• Repayment - This tax credit does not have to be repaid. However, if the qualifying home is sold within three years of purchase, the entire amount of the credit must be repaid.
• Credit Amount - Credit will be for 10% of the purchase price of the property up to $8,000.
• Property Eligibility - All primary residences including single-family homes, condos, townhomes, mobile homes and even houseboats (not that that matters much in Missouri). Duplexes do qualify, but generally, only 50% of the property is considered your primary residence so you can only consider half the purchase price when determining the amount of credit.
• Personal Eligibility - For first-time homebuyers only. In this case, a first-time homebuyer is considered someone who has no owned a primary residence in at least 3 years.
• Income Limits - Credit begins phasing out when the purchaser’s income exceed $75,000 for a single person or $150,000 for a married couple.
• Timetable - Available for purchases between January 1, 2009 and December 1, 2009.
• Claiming the Credit - Fill out IRS From 5404 to determine your amount of eligibility and apply this amount to your 1040 tax return on Line 69.

One of the biggest concerns with this tax credit is that you don’t actually see the money until after you purchase the property. You might receive the funds within just a month or so of the purchase, but that doesn’t do a lot if you need it up front. Thankfully, in the State of Missouri, there is way around this issue.

In response to the passage of the Stimulus Bill, the Missouri Housing Development Corporation unveiled a loan program that will give you as much as $6,750 prior to closing, using your pending tax credit as collateral. As long as this amount is repaid by June 2010, no interest will be due on the amount. This program is available only for Missouri and more info can be found here.

While you can’t use this credit on an outright investment property, the fact that it is available for duplexes and foreclosures makes it an appealing option if you are looking to take advantage of this great buyers market and also find a place to live. If you are looking to do a bit of rehabbing, you can even use the $8,000 to help fund the project.

On the other side of the situation, this program should also be a help to rehabbers trying to sell their finished projects. A free check for $8,000 might be too much for formerly skiddish buyers to pass up, which may help the residential sales market in the coming year. It’s really a win-win for everyone involved in the real estate transaction.

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One of the best things about blogging St. Louis development and real estate deals is that I am increasingly finding myself being contacted by a lot of interesting people. I’ve actually been contacted by quite a few local and even national news providers in the past few months asking my opinion on certain matters or for advice on the direction of a story. But as great as those are for my personal morale and ego, I have yet to be featured in any of those stories. That is, until now.

Yesterday, Adam Allington of the St. Louis NPR affiliate KWMU, contacted me to ask me my opinion about the kinds of opportunities and obstacles that normal everyday buyers face when they are looking to buy a foreclosure. I guess he liked what I had to say because he asked my to meet up with him this morning. He ended up interviewing me for about an hour while we strolled through an example foreclosure in Benton Park.

The great thing about it is that he says it is going to be a national story. Who knows how much of my interview he will use, but its cool nonetheless. Getting to take part in story for a station I really respect is a great honor. Hopefully I did the real estate market and St. Louis justice in my interview. When I know about the air date, I’ll be sure to pass it along. Thanks for working w me Adam.

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