May 3, 2010
America's Growing Vulnerability to CatastropheBy Steve McCann
The major responsibility of those in government is to be certain that a country is capable of surviving a worst-case scenario such as war, massive economic downturn, or a catastrophic natural disaster.
It has been predicted that California has a 99% chance of a major devastating earthquake in the next thirty years. The central part of the United States extending to the east coast, in an area that has recorded four of the largest earthquakes ever in North America, could experience a cataclysmic earthquake sometime in the next fifty years. The cost of these events may well be in the trillions of dollars.
The economy, so wedded to the world financial structure and socialist economic policies, has a very high probability in the short- and long-term of repeating the scale of financial wreckage that the country has recently undergone.
Yet the current regime in Washington, D.C. does not seem to understand or care that the policies they are pursuing will leave no margin for error in the event of an apocalyptic natural or man-made calamity.
The wealth of the United States has always been its fallback position in order to come through wars and recessions or cope with natural disasters. The country's enormous gross domestic product (GDP) has allowed the government to spend (by reducing taxes, if necessary, and borrowing) whatever monies were needed to offset the losses incurred from these events and/or to restart the engine of the economy.
This nation has had an unlimited credit card and until recently used it somewhat wisely, compared with what has begun under Obama. As long as the United States maintained a reasonable debt-to-GDP ratio (less than 50%) and kept the annual budget deficit to less than 3% of the GDP, then it always had the ability to survive a contingency of unimagined proportions.
The Obama administration and its fellow travelers in Congress appear to care little for the long-term survival of this country. They are in the process of squandering the nation's wealth, and thus its well-being, in their headlong determination to "fundamentally change the country."
This let the consequences (unintended or otherwise) be damned approach to governing will put the United States in a position where it will not have at its disposal the funding and economic activity necessary to recover from whatever catastrophe the country may encounter in the future.
At the end of 2008, the publicly held debt of the U.S. government stood at 40.2% of GDP. In the four years of the Obama administration, the debt will increase $5.7 trillion (equal to the entire debt incurred by the United States since its inception up to and including 2008). This will result in the country having a debt to GDP ratio of 72% by 2012, a mere two years from now.
It has been acknowledged by a consensus of economists that unemployment, as a result of the Obama agenda, will remain in the double-digit range over the next three to four years. This government refuses to recognize the need for spending reduction, opting instead to adopt new entitlement programs and, as part of its war on wealth, dramatically raise any and all taxes on the citizens and the private sector. That component coupled with the massive new regulations already passed and proposed will result in inflation adjusted negative or stagnant GDP growth.
Without significant repeal of the Obama tax and regulatory policies and changes in the entitlement programs and overall reduction in government expenditures, the current spending proposals and impact of the trillions needed for ObamaCare, Social Security, and Medicare and interest payments will result in the debt-to-GDP ratio exceeding 100% by 2019.
Recently the bond ratings of Greece, Portugal, and Spain have been downgraded (Greece to junk bond status). Not only is the entire European Union threatened with collapse because of the excessive debt and budget deficit policies of these countries, but so is the entire world economy. In the case of Greece, the debt-to-GDP ratio is 125%, and the annual budget deficit is 13.6% of the GDP. Greece can no longer borrow money (except at excessively high interest rates) and must turn to the European Union for a bailout in order to pay debts due within the month.
By comparison, the United States, if it remains committed to the Obama agenda, will experience a debt-to-GDP ratio of 104% and an annual budget deficit of 9.7% of GDP by 2019. This nation will become the next Greece.
The United States, unlike Greece, will not have the European Union or the IMF to turn to. Where, then, will the monies come from if the worst occurs?
How would we pay the recovery costs associated with a catastrophic natural disaster? From whom could we borrow the money without paying a usurious interest rate and forcing the country into further decline? Can we expect our traditional allies, who will find themselves in a similar situation, to come to our aid?
As to a dramatic economic downturn, the traditional tools used to come through a recession or depression will not be available. Would the debt-holders of the United States' bonds concur with significant tax reductions to spur the economy or would they agree to finance more debt as a stimulus?
Would the United States choose as an alternative hyper-inflation by printing more dollars in order to mitigate the debt in a potential repeat of the devastating experience within the Weimar Republic in the 1920s? This strategy would ultimately plunge the citizenry into a dramatically reduced standard of living and excessive unemployment.
These are the only choices the country will have, yet never in the history of this nation have we had an administration and a Congress so willingly and with no second thoughts place their agenda and philosophy ahead of the survival of the United States. This may well border on treachery of the worst sort, as it violates the allegiance owed by our elected leaders to preserve and protect the long-term welfare and well-being of the people and the nation.
This November, as the American citizens vote, they must ask themselves: Will the person I vote for fulfill his or her sworn obligations to make certain that the United States can survive any and all potential catastrophes?