Lurching Towards Doom
Although the National Bureau of Economic Research told us this week that the “Great Recession” that “began in December 2007 ended in June 2009,” as reported by MSNBC.com, some think “the worst is yet to come.” Jim Bacon, who has an op-ed posted at Bacon’s Rebellion this week, predicts that Virginia, which has held its AAA bond rating for 70 years, will lose that rating within “20 years -- perhaps not even 15.”
While Bacon doesn’t expect Virginia to begin “an orgy of California-style taxing, borrowing, and spending, he says Virginia does “face two horrendous challenges for which we are unprepared.” Those two challenges are:
“First, fiscal pressure on state and local governments across the United States will be unremitting in the years ahead. In particular, health care spending, which has increased as a share of state and local spending from 12 percent in 1978 to 20 percent in 2008, will continue growing without let-up. Absent policy changes, concluded a June Government Accounting Office study, “state and local governments’ long-term fiscal position will steadily decline through 2060.”
“Secondly, Virginia’s economy is highly dependent upon federal spending — according to a Tax Foundation special report, the commonwealth had the 7th highest ranking of federal expenditures per capita in the country in 2004. If something happens to our No. 1 industry, the federal government, the economy is toast, and so are tax collections.”
So who is Jim Bacon? Barbara Hollingsworth, local opinion editor of the Washington Examiner, explains:
“(A)long 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." (link to Bacon's book added)
“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.”
No wonder Gallup reported on July 5, 2010 that debt and government power were among the top concerns of Tea Party supporters!