Few politicians in either major party are willing to admit this, but our big federal entitlement programs are rapidly running out of money. What happens then?
In this sharp AIER article, economist David Rose sketches out the terrible future. “As total baby boomer benefits payments mount,” he writes, “the Treasury has had to issue bonds at an accelerating rate. This is why it only took 260 days to go from a national debt of $34 to $35 trillion a few weeks ago. ”
Many Americans will say: We’ve been hearing scary things about the national debt for decades and we’re still doing pretty well, aren’t we?
Rose argues that we are nearing an inflection point where the Fed will start buying corporate shares:
In the event of a recession triggered by increasing interest rates from continued deficit spending, the Fed may ask for Congressional approval to purchase private equities in an effort to avert the collapse of an entire generation’s 401Ks from widespread firm bankruptcies due to their inability to cover debt payments. This is hardly unprecedented. The Bank of Japan began purchasing stocks in 2010 and is now the largest owner of Japanese stocks in the world. This undoubtedly contributed to Japan’s stock-market plunge a few weeks ago since the bank is now trying to sell those assets.
The economy suffers enough from federal regulation, but imagine the mayhem if the government actually owns lots of business shares. Our political leaders will need to take their heads out of the sand before it’s too late.