Decline of the United States (Part 3)

Our national debt which has reached a record breaking amount under Obama is one of the major reasons for the decline of the United States. Americans are totally ignorant of the consequences of debt. This is obvious from the number of people who went into debt during the 1990’s and early 21st century. They thought the good times would continue until the housing crisis hit in 2008. Rather than learn from the experience, people keep thinking the government will save them through its socialist programs.

Despite what socialism has done to Venezuela, Greece, Italy, Spain, etc. Americans don’t think what happened to those nations will be the case here. Their detachment from reality will have future consequences.

Obama and the Democrats have spent so much money that Janet Yellon, Chairperson of the Federal Reserve Bank, declared a month ago that our deficit is unsustainable. Yet she is ignored.

If you ask people what the difference is between a debt and a deficit, about 98 to 99% of people will not be able to answer you. A deficit is when the government doesn’t collect enough tax money to pay the interest on the debt. For example, if a person has an interest payment of $1,000 but only pays $600, the deficit is the $400 shortfall. The debt is the total amount of money that is owed.

The Democrats thought that they could close the deficit gap through higher taxes. This year the Treasury Department reported that the government did not collected enough taxes it pay its debts or the interest on its debts. Historically, higher taxes only work in the short term. The reason is the $1.58 rule. For every dollar collected by the government in taxes, the government spends an additional 58 cents more than it collects. The higher spending results in the need for more taxes, more borrowing and a higher debt. It becomes a vicious cycle.

By the time the Obama Administration leaves office in 2016, they will have doubled the national debt according to the Congressional Budget Office. So what? Well, the Federal Reserve is printing money at record levels. This creates inflation. Inflation is a hidden tax. It makes the money in your pocket worth less which requires you to spend more money to buy things. Historically, wages don’t keep pace with inflation but lags behind by two to three years. Personal wealth declines along with the wealth of a nation.

People and nations reach a breaking point where they are unable to pay their financial obligations. This results in a loss of credit. Credit is a vital requirement for borrowing money. The Obama Administration reached an historic first when Moody’s downgraded the credit rating for the United States.

As a result of World War I, the United States became a creditor nation because we had the financial resources to fund the allies fighting the Central Powers. Other nations owed us money. Today, Obama and the Democrats have reversed that situation and have made the United States a debtor nation. Isn’t it interesting that we defeated Japan in World War II and now we owe them money because of the out of control spending of the Obama Administration.

Perhaps the most stunning thing is that we are paying enormous amounts of money to an aggressive China which may be a nation we fight in the future. China is using the interest money we pay them to build up and modernize their military. Think about it! Obama is using our tax dollars to strengthen the military of a potential foe while he reduces our own armed forces so he can pay for ObamaCare and other select programs.

Great nations are wealthy nations.  Obama and the Democrats are bankrupting our nation.

 

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About camden41

Retired public school administrator Retired history professor: Taught Western Civilization, American Civil War, United States History, Economic History, Ancient & Medieval Foundations, American History Since 1945
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