More than 7.3 million jobs have disappeared, unemployment remains stubbornly stuck at 9.6 percent and U.S. household wealth just fell $1.5 trillion in the second quarter.
So this week’s pronouncement by the National Bureau of Economic Research that the recession officially ended in June 2009, and that the U.S. economy will grow 2.6 percent this year, is one of the few bright spots in the past 18 months.
But then along comes Jim Bacon, author of “Boomergeddon,” who not only rains on the slowly moving parade, but demonstrates — using President Obama’s own budget data — that national bankruptcy is “a near inevitability, given the myopic, corrupt and gridlocked political culture of Washington, D.C.”
Bacon, who lives in Richmond and blogs at Bacon’s Rebellion, asked Richmond-based Chmura Economics & Analytics to crunch the numbers to see what would happen if growth remained just one percentage point shy of the 3 to 4 percent assumed in Obama’s 2011 budget. He also asked them to look at mild recessions occurring within the next 10 years.
Given the economy’s recent history, both are perfectly plausible — even likely — scenarios. In the event that one or both of these things happened, Chmura analysts reported, the federal deficit would grow twice as fast.
That’s scary, because annual payments on the national debt are already expected to hit nearly $1 trillion for the next 10 years. At the end of 2020, Congressional Budget Office director Douglas Elmendorf warns, the public debt — 48 percent of which is held by foreign creditors — will balloon to $20.3 trillion, or 90 percent of GDP, just as 78 million aging baby boomers begin making unprecedented demands on the government’s fraying safety net.
“It will be 15 years before all the wheels fall off the bus,” Bacon, the former editor in chief and publisher of Virginia Business magazine, told The Examiner. The “point of no return” will be triggered by rising global interest rates, which “will climb faster than the government’s ability to cut things.”
Panicked investors who no longer trust in the “full faith and credit of the United States” will stop lending, and the bottom will fall out — triggering a worldwide depression.
Middle-class baby boomers who worked hard, saved money and played by the rules will get “totally hosed,” Bacon says, as the permanently entrenched Washington elite takes any money promised to them and redistributes it to growing numbers of government dependents.
“If you’re looking for ‘smiley face’ advice on a blissful retirement, this isn’t it,” Bacon admits. “There’s a good chance you’ll spend your golden years eating dog food and recycling beer bottles.”
Even if the GOP wins control of Congress and President Obama is defeated for re-election in 2012, “the political pyrotechnics would not change the underlying economic trends. … Government will continue growing until the day the political class can borrow no more. That day, Boomergeddon, is coming — probably a lot sooner than you think.”
The Tea Party represents a small sliver of hope, but “once you start cutting $1 trillion out of a $3.7 trillion budget, there’s going to be an electoral backlash, so even if they start, there’s no guarantee they’ll be able to finish,” the author glumly told me.
Bacon’s acerbic warnings are echoed by Boston University economist Laurence Kotlikoff, author of “The Coming Generational Storm,” who claims that the federal government is “engaging in Enron accounting” and “lying about the amount of debt.”
He estimates the total federal debt at $200 trillion, including “off-budget” entitlements such as Social Security and Medicare. Boomers’ retirement benefits are a balloon payment that the hocked-up-to-its-eyeballs federal government won’t be able to cover.
Barbara F. Hollingsworth is The Examiner’s local opinion editor.
