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-- create the need for "more borrowing from abroad;"
-- reduce "domestic investment;
-- depress income growth in the United States;" and
-- "seriously harm the economy."
In addition, "Lenders may become concerned about the financial solvency of the government (and) demand higher interest rates to compensate for the increasing riskiness of holding government debt." Worrisome as well - "Both foreign and domestic lenders may not provide enough funds for the government to meet its obligations."
Admitting its estimates may be grossly understated, the CBO said its projected budget shortfalls are unprecedented in US history, signaling a growing urgency to address them.
Further, the analysis omits how financial markets will react, but it anticipates "much more (disorder) as investors' confidence in the nation's fiscal solvency beg(ins) to erode....causing (dollar valuations to) plunge, interest rates to climb, and consumer prices to shoot up."
The Federal Reserve's second quarter "Flow of Funds Accounts" report highlights the problem by showing federal spending crowding out businesses and consumer households. In Q 1 2009, the Treasury borrowed $1.443 trillion, and in Q 2 $1.896 trillion with projected continued high levels ahead.
In contrast, bank credit has dried up. Q 1 2009 outstanding loans were liquidated at an $857.2 billion annual rate and $931.3 billion in Q 2. In addition, net new mortgages aren't being created. Instead, annualized liquidations hit $39.3 billion in Q 1 and $239.5 billion in Q 2. Cash availability through credit cards eroded by $95.3 billion in Q 1 and $166 billion in Q 2.
According to Professor Tim Congdon of International Monetary Research, "There has been nothing like this in the USA since the 1930s. The rapid destruction of money balances is madness," suggesting serious trouble ahead.
The September 2009 US Treasury Bulletin adds more by showing America owes foreign investors nearly $7.9 trillion, and suggesting that these sources may begin drying up and eventually contract because dollar investments no longer are safe. Some, in fact, say the time for alternatives is now.
Medicare Reform Through MedPAC - The Medicare Payment Advisory Commission
Established in 1997 as an independent congressional agency, it advises Congress about Medicare. Each year, it submits a "Report to the Congress: Medicare Payment Policy," the latest on March 17, 2009 for FY 2008 with recommendations to the nation's lawmakers:
"to help constrain costs both in the short and long run. (These) recommended actions are one part of a broader array of recommendations aimed at more fundamentally reforming Medicare's delivery system," including achieving greater overall "efficiency" to control the unsustainable out-year costs.
However, since recommendations aren't policy, S. 1110: Medicare Payment Advisory Commission (MedPAC) Reform Act of 2009 (with one co-sponsor) was introduced in the Senate on May 20:
"to amend title XVIII of the (1935) Social Security Act, making the Commission an executive branch agency, and providing the Commission new resources and authority to implement Medicare payment policy."
