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  • "I'm Afraid To Tell You There's No Money Left"

    When Britain’s new Chief Secretary to the Treasury, David Laws, walked into his office last week, he found a letter from his predecessor, Liam Byrne. Laws assumed it contained useful advice.

    But when he opened the envelope, he found that the letter – which he characterized as “honest but slightly less helpful” than he had expected – had only a single line:

    Dear Chief Secretary, I’m afraid to tell you there’s no money left.

    And so there isn’t. Americans don’t realize just how bad Britain’s situation is. True, Britain’s not in the Euro, which is a huge help. But Britain’s got a larger structural deficit – in other words, the deficit after you factor out the effects of the recession – than Greece, and its borrowing one pound for every four it spends. It will take years for Britain to recover from the pain New Labour has inflicted.

    If only we were so lucky. As Edmund Conway pointed out last week, the U.S.’s situation, according to the International Monetary Fund, is if anything even worse than Britain’s. While Britain’s debt has grown rapidly since 2000, the growth at least looks likely to stall by 2015, if the new British government carries through on its pledge to cut spending.

    On the other hand, there’s the U.S., where debt is increasing far faster than almost any other country. And because the average maturity on U.S. debt is relatively short, the U.S. will need to sell a lot of debt very quickly, which means the U.S. is even more vulnerable if the market suddenly decides to demand higher interest rates. As the IMF puts it, “the U.S. [needs] to reduce its structural deficit by the equivalent of 12% of GDP, a much larger portion than any other country analyzed except Japan.”

    And it gets better. These numbers don’t reflect the effects of Obamacare, or any more emergency spending (‘stimulative’ or otherwise). Nor do they reflect the fact that, if taxes are held at their historic levels, entitlement spending will by 2052 consume the entire federal budget, leaving nothing for the national defense or even interest on our debt mountain.

    Mr. Laws may not see it this way, but his predecessor’s joking letter may have done him, and his country, a favor by dispelling any remaining illusions about how badly off Britain is. If only President Obama could find a similar letter on his desk in the Oval Office tomorrow morning.

    Posted in Economics [slideshow_deploy]

    10 Responses to "I'm Afraid To Tell You There's No Money Left"

    1. Brett, Albany, NY says:

      “I’m Afraid To Tell You There’s No Money Left”

      Isn't that what Hank Paulson told George W. Bush's dog back in 2008? (http://www.youtube.com/watch?v=qvPuNU_meEc) 0:28 – 0:40

    2. Pingback: » Financial News Update – 05/19/10 NoisyRoom.net: The Progressive Hunter

    3. anniescloset, califo says:

      Obama has been receiving such letters "in his drawer" from We the People, from the Tea Party and from smart cookies like Republican Congressman Paul Ryan for almost the entire time he's been in office. He just chooses to ignore them because the financial ruin of the US is part of his plan to subjugate the nation and work towards a global government.

    4. Spiff says:

      President Obama has to bankrupt the nation before he is called out as an impostor and disposed from office. If we are financially sufficiently weakened, our defenses will be down, allowing for a Socialist take-over.

      Spiff

    5. Ted Sharp; Fort Laud says:

      According to Drs.Clower and Piven, Columbia University, fiscal collapse of the United States, via unfundable mandates in social welfare spending, their prefered vehicle, would result in the desired Progressive/Socialist State perforce. This was delayed by the gaining of majority by Republicans in Congress in 1994. In turn, the Obama-Democrat 2008 sweep has reinstalled that governmental objective, but by means of massive deficit spending to "save the economy" and new unfundable social obligations requiring extended foreign credit indefinately. We're broke. Our legacy will be indentured servitude for our country.

    6. Kevin Habib, Glen Bu says:

      Interesting you point out the dire long term budget picture and make absolutely no note of what caused the problem. To point to Obama's policy as a reason is incredibly disingenous and simply ignorant. The recovery package was less than half the cost of the 2001 and 2003 stimulus packages President Bush Jr. and GOP Congress passed. You fail to mention either of those stimulus packages that reaped generous benefits the top 1% and top 5%. Youfail to mention the cost of Iraq or Afghanistan wars. You fail to mention the Medicare Part D bill passed by the Republican Congress. To point to Obama and the Dem Congress as the reason for the long term fiscal issue is an absolute joke and shame on you.

      Did CBO not declare the health reform law will save a trillion dollars for taxpayers over the next 10 years – yet you criticize Obamacare and seem to make allusion that it will add to the long term fiscal picture.

      It's posts like these that are main reason the GOP and groups like Heritage have lost credibility.

    7. Pingback: News Articles 05-21-10 : GainesvilleTeaParty.org – Grassroots tea party movement in Gainesville, FL advancing the values of Fiscal Responsibility, Limited Government, and Free Markets

    8. Steve Acosta, MD, Po says:

      The problem is that there is this assumption that the entitlement expenditures have no control, an assumption stunningly wrong. Federal law,as embodied in the acts that generated Social Security, Medicare, Medicaid and other entitlements, all have provisions that allow Congress to alter the payments in any way. Congress could legally halve all Social Security payments tomorrow and this would be perfectly legal and, probably, not alterable.

      There is no possible way that entitlement payments would consume the entire Federal budget. Congress, and, no doubt, the Executive Branch, would be ratcheting things down way before there was even a hint of trouble.

      If I was 30 years old, I would be looking at all the Federal taxes extracted and wonder , :"Where the hell am I going to be in 35 years and who's going to buy me dinner"

    9. Pingback: Kagan: Favoring Foreign Law Over U.S. Constitution

    10. Helmetfoot says:

      Mr. Habib,

      some folks blame the dems and the President. Some blame the GOP and George Bush.

      Most of us blame "Washington" that includes the aforementione and any future "buy my way into power" people.

      All we can do is try.

      I'm surprised you didn't blame the T-party people. At least they are taking responsibility for the people in power and are working to get ALL of them out.

      Give them a crack at it and then who can we blame..

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