Saturday, April 23, 2011

End game near

When the government is paying out more in transfer payments than it collects in total taxes you know the end is near for the US dollar and economy.

As you can see, government transfers of funds to households exceeded taxes paid by households as a percentage of personal income. For the first time since 1936. And the gap is growing.

In raw numbers, in February of this year, households received $2.3 trillion in income support from unemployment benefits, Social Security, disability insurance, Medicare, Medicaid, veterans' benefits, education assistance and other cash transfers of government funds to individuals.

That leaves the government caught in a trap of its own making. With more financial responsibility being demanded by average citizens and members of both parties, another substantial infusion of money (with its attendant prospect of runaway inflation) is going to meet with a lot of resistance. But the temptation is going to be powerful. Because household revenues will drop as government benefits decline, and a prolongation of the recession becomes a certainty.
This will continue until it cant continue anymore. I than guarantee that the US will change beyond anything anyone can imagine.

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