As far as the eye can see, there are $1 trillion deficits. I have been predicting this for a while.
Right now, there just isn’t the political will in the United States to get real government and deficit reform done.
If you really want to balance the budget, it will take guts and determination. You will have to increase retirement ages and cut the sacred cows of Medicare and Social Security. However, most polls show that Americans don’t want these entitlements cut.
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I hate to be the bearer of bad news but I don’t see serious cuts to the budget, even by the Republicans, until the “bond vigilantes” are out in full force and interest rates spike.
The recent tax-cut deal was an abuse of the U.S. dollar as the reserve currency of the world. No other country in the world is increasing spending and cutting taxes at the same time.
At some time, there will have to be drastic changes to the budget: slashes in military spending, cuts in entitlements and the introduction of some sort of value-added tax.
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Many nations are already beginning to talk about getting away from the dollar.
China is doing the talking with their money by investing in mining projects in Africa, offshore drilling in Brazil and resorts in the Bahamas rather than buy U.S. Treasurys.
Many European countries are also angry that they must cut back while the U.S. continues its reckless spending ways.
At some point, this will end with the vigilantes rearing their ugly head, causing interest rates to spike and forcing the government officials to cut as the U.S. will become insolvent if they don’t.
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