Will We Ever Achieve Financial Stability?

For the first time in four years, the United States Senate, controlled by the Democrats, has passed a federal budget but the House of Representatives dominated by Republicans will never approve it. This continued dysfunctionalism between the two houses is causing hardship and grief to hundreds of thousands of civilian government employees and putting tremendous pressure on the Federal Reserve System to keep our economy growing.

Apparently, Speaker Reid had a predetermined agenda and refused to allow any amendments. As a result, many airport towers in small communities such as Boca Raton, Florida will close by June 15, 2013, the White House is closed to tours, the Head Start Program for children will be cut and the National Park Service will close camp sites and other favorite tourist attractions. The Democrats will reduce spending that directly hurts average and low income Americans but will not touch the benefits received by retired high income seniors who live in gated communities and receive thousands of dollars of dividends? Some executives that were earning millions per year also collected unemployment compensation! Do you see something wrong with this picture? Yes, the national defense budget will be cut by approximately 10%; however if hostilities occur in any part of the world we may have to respond and that will require additional expenditures.

The Republicans in the House of Representatives have also created a federal budget and they know full well the United States Senate will never approve it. Admittedly, the House budget is much more realistic and will make significant reductions in current expenses along with reductions in the national debt; but it will adversely affect future participants in Medicare and Medicaid. The emphasis is on the word future but current recipients of these two programs are absolutely against any modifications and will exert tremendous influence to kill this budget.

The most knowledgeable members of both political parties know full well that almost 80% of each annual federal budget is spent on four items: Medicare, Medicaid, National Defense and interest on the national debt. More specifically, out of an approximately $4 trillion budget, $3.2 trillion is spent on only these four items. Interest rates will increase in the near future causing an increase in the amount of funds required to pay the interest on Treasury bonds. To further complicate matters and require more spending, approximately 30 million more Americans are scheduled to receive medical benefits in the year 2014. Federal expenditures on both Medicare and Medicaid will increase dramatically.

Perhaps the grand scheme of the Democrat Party is to beguile voters and entice them to vote for Democrat candidates and thereby control the House and the Senate in 2014. The big question then becomes: once in office, will the Democrats impose stringent cutbacks in the 2015, 2016 budgets to help reduce the national debt - or will they continue on with their profligate ways? The Federal Reserve cannot continue to create money out of thin air for Congress to spend without terrible consequences. There has always been a day of reckoning throughout history for every country that has walked this financially irresponsible path.

Let's hope we become the exception to historic events. What a way to run a country.

Rudy Berberian a semi-retired successful businessman (he is still a professor of Economics, part-time, at a local college). You can read all of Rudy's articles or order his book from his web site, The Business Professor Inc..

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