From right to left, Washington's think-tank senior economic fellows agree that the capitalist system is broken. But few agree on what comes next.
Borrow-and-spend now must give way to save-and-invest. Clearly, the mammon of profits-before-people has been knocked off its pedestal. Borrowing $2 billion to $3 billion a day from other countries — mostly China — to maintain the world's highest standard of living, based on conspicuous consumption, at a time of growing world shortages no longer is viable.
New York's Federal Reserve says the country borrowed $4.4 trillion — 85 percent of total net borrowing worldwide — in the first six years of this decade to finance its current account deficits.
Obama administration palliatives now total a little more than $8.5 trillion, including $300 billion on Fannie Mae and Freddie Mac, AIG, and Bear Stearns (now part of JPMorgan Chase); $300 billion on Citigroup; $700 billion on the Troubled Assets Relief Program; $800 billion on Fed-directed asset-backed debt-purchase programs; $2.3 trillion on Fed commercial paper programs; and $2.2 trillion on other Fed lending and government commitments, according to Bloomberg.
The buy-on-rumor, sell-on-news speculators are understandably confused. They read — or, more likely, hear — that banks still are holding the bad assets that the original $700 billion TARP was supposed to buy. Therefore, the new Plan B may include going back to Plan A, this time around forcing the government to buy those bad assets.
Despite all this, the public is assured that the stimulus package of $787 billion eventually will revive the U.S. economy. And when it does, mourning will be declared as the hugely inflated bubble in Treasuries bursts, says Money Morning.
Meanwhile, "Saving America's Future: A Challenge to the American People," as spelled out by 24 of the nation's most illustrious names, including voices from both major parties. The study, which the Center for the Study of the Presidency and Congress released, warns that worse news is yet to come because today's economic reality is "only the tip of the iceberg."
And if we do not act now, in everything from "structural challenges in financing our government" to "ensuring quality public education, competing globally for jobs, extending healthcare while reducing its cost" and much more, "a far greater crisis awaits below the surface and threatens to sink our ship of state."
Clearly, the United States cannot continue building up the national debt, now almost $11 trillion, when "the government has committed to more than $56 trillion in liabilities and unfunded promises," according to one of the report's key findings. The nation's "physical infrastructure is crumbling around us . . . neglected . . . to such a degree that it would cost $2.2 trillion just to bring it up to 'good' condition."
While the economy was losing 23,000 jobs each day, pushing unemployment to more than 8 percent, the highest in 25 years, household net worth decreased $11.2 trillion in 2008 alone.
During the past year, about $50 trillion in the value of financial assets, equivalent to one year of the world's gross domestic product, was destroyed, shrinking the world economy in 2009 for the first time since World War II, the report says. The value of equities in retirement plans dropped by $4 trillion in a year.
The tax code contains 3.7 million words, and "current fiscal and financing practices are unsustainable," the report says.
The federal government is "increasingly dysfunctional, politically and ideologically divided, shortsighted, compartmentalized, bureaucratic and arcane,” say the 24 wise men and women who crafted the report from the Center for the Study of the Presidency and Congress. “Both major political parties seem unable to agree on the approaches necessary to address the structural challenges confronting the country. To make matters worse, these impediments to effective leadership seem to be growing by the day."
America is acknowledged widely as having one of the worst K-12 education systems in the world, yet it spends more per student than all but two other nations, the center’s report says.
More than 1.2 million students drop out of school every year — or 6,000 every school day. And only 56 percent of students who enroll in four-year colleges after high school manage to earn a bachelor's degree.
"The more our children are exposed to our educational system, the more poorly they perform on international tests," the report says.
And as President Obama said before the joint session of Congress, "This is a prescription for economic decline because we know the countries that out-teach us today will out-compete us tomorrow."
In addition, the United States, the world's largest energy consumer, produces 10 percent of the world's petroleum but consumes 24 percent, the report says.
The International Energy Agency forecasts that world demand for energy could grow by 45 percent by 2030.
"The time has arrived to shift the country's energy signature toward clean-energy sources, greater levels of domestic supply and increased innovation," the report says. "At the same time, sustained investment is required across the entire energy spectrum, and around the world, to avoid new oil supply and price shocks over the next decade."
America's infrastructure, which earned a D on the most recent report card from the American Society of Civil Engineers, now requires $2.2 trillion over five years to shore up the more than 25 percent of the nation's bridges that are structurally deficient or functionally obsolete and other ailing pieces of the nation's infrastructure, the center’sreport says.
Deficient roads cost the economy $78.2 billion in time and fuel. The cost of aviation delays will rise from $9 billion to $30 billion by 2015. But the stimulus package contains billions of infrastructure spending, including $27.5 billion for highway construction; $16.5 billion to modernize public infrastructure; $18 billion for clean water, flood control, and environmental restoration; and $17.7 billion for transit and rail.
As for modernizing the U.S. military, the latest National Intelligence Council assessment considers the emergence of a global multipolar system out to the year 2025 to be a "relative certainty," the center’s report says. "Shrinking economic and military capabilities may force the United States into a difficult set of trade-offs between domestic and foreign-policy priorities," the National Intelligence Council assessment concludes.
America is faced with three options: business as usual, muddle through, or a transformational future, according to the center’s report.The first means that each American's share of the federal financial burden, now at $184,000, will continue to grow.Muddling through will postpone the toughest challenges — i.e., healthcare reform — to where we need to be today to a dangerous future of social upheaval.Transformation, the report says, will require citizens to shed their role as spectators and demand that their leaders "set aside short-term interests and take bold, nonpartisan steps, promoting the spirit of creativity, innovation, and entrepreneurship" that has carried the United States for 233 years.
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