Okay, we're gonna need about 10,000 more of these.
“Welcome to the new Banana Republic of America,” John Rutledge of Rutledge Capital says after parsing the latest CBO long-term budget projections.
Between entitlements, bailout money and the spending under the Obama budget, the federal debt will rise to four times recent levels, he says. The problem with that is, of course, that it will bury the nation under a mountain of debt.
The CBO concluded the budget is on an “unsustainable path,” (a phrase that goes back at least as far as 2006) with federal debt growing much faster than the economy over the long run.
If only tax rates rose to meet the spending growth, rather than, say, cutting back on spending, tax rates would have to reach levels “never seen” in the US.
You might say that’s a bit of a problem.
“The world envisioned in the CBO projections won’t work,” Rutledge says. “Growth and employment would be lower. Inflation and interest rates would be higher. And the stock market and the dollar would crash.” And unless people start paying attention, he says, it won’t change. But there doesn’t seem to be a very high level of awareness of this problem right now.
“Sadly, as I look out my window I don’t see any pitchforks.”
