Feb 14, 2011

Liars with Calculators

Todd StrandbergBy Todd Strandberg
Rapture Ready

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Anyone making the most honest assessment of America's financial health would have to conclude that we are in deep trouble. Despite the fact that we are on a collision course with national bankruptcy, the general mood of the nation remains rather upbeat.

I've been keeping track of a number of financial reports on the economy, and I see a massive pattern of fraud and deception. The people who provide the economic stats to the public are doing everything they can to make the numbers look rosy.

A smoke alarm is designed to let us know if there is a fire in our house. It would be a criminal act for someone to think he or she could prevent the danger by removing the batteries, but this is exactly what some people are doing.

Earlier this month, the Bureau of Labor Statistics released the jobless reports for January. The unemployment rate fell from 9.4 percent to 9.0 percent. Many people were left to wonder how the rate could decrease by so much when January only saw a reported increase in payroll employment of 36,000. What happened is that the Labor Department reduced the workforce by about half a million people.

The Congressional Budget Office is responsible for issuing projections for America’s national budget. In its latest report, the CBO is projecting a $1.5 trillion deficit this fiscal year, which is $414 billion - or 38 percent - more than the prediction they made only last August. After doing some research, I found out that the CBO is frequently wrong because it relies on projections that are totally divorced from reality. Here are some examples:

  • They expect total tax revenues to rise 43 percent in the next two years alone and 129.6 percent over the coming decade. This would be a remarkable change for an economy that is only growing at 3 percent.
  • There will be sharp reductions in Medicare's payment rates for physicians. Most private economists see Medicare deficit spending going from 3.6 percent of GDP to 6 percent.
  • Discretionary spending will rise at the rate of inflation (or rather, of price increases, which they project to be low) instead of the MUCH faster rate of increase seen over the last twelve years.
  • They're expecting 2.5 million jobs every year for the next decade. That's 208,334 new jobs every single month for 120 months!
  • Interest rates will remain at historic lows for the foreseeable future. Rates are already rising, and they will only continue to rise as investors realize how risky American debt has become.
Even allowing for the CBO’s high growth assumptions, low inflation, rising taxes, the unemployment rate falling to 5.2 percent by 2021, and higher revenues, the national debt will STILL more than double over the next decade. If you use numbers that are based on reality, the debt will triple, if not quadruple, over this same period.

Social Security and government pension funds are another storehouse of misinformation. Both of these retirement plans are giant Ponzi schemes that have reached the end of their life cycles. We are still being told that Social Security has a trust fund that will last until 2037. The fact is that Social Security is running in the red right now. Within a few short years, it will be adding tens of billions to the annual deficit.

The prize for the biggest liars would have to go to the various debt-rating agencies. They were instrumental in the housing debacle. Firms like Moody's, Standard & Poor, and Fitch routinely gave AAA rates to bonds that were almost guaranteed to default. The rating agencies have made some changes, but they are still wildly underestimating the risk factors for bank and national debt.

The most outrageous error is the AAA rating placed on Uncle Sam’s debt. China has $3 trillion in foreign reserves, and yet its rating is four points below ours. We have $14 trillion in debt and a trade deficit of $600 billion each year.

The grand summation of this mountain of deception is that we will likely have little warning when the financial meltdown takes place. Everything will be continuing along as normal, then the wheels of our economy will suddenly fly off. My advice is to place your trust in Jesus Christ. He is the One who can deliver us from this doomed world.

Related Links
Obama releases FY 2012 budget as deficit rises to record-high $1.6 trillion - Daily Caller
Debt now equals total U.S. economy - Washington Times
Republicans Dismiss Obama Budget as 'Path to Bankruptcy' - Bloomberg
China overtakes Japan as world's No. 2 economy - Washington Post
The President Chickens Out on Spending Cuts - NationalReview.com