In 1870, all Federal spending was 7.3% of national income, 9.4% in Britain, 10 % in Germany and 12.6% in France. By 2007, the figures were 36.6% for the US, 44.6% for the UK, 43.9% for Germany and 52.6% for France. Military costs once dominated budgets; now, social spending does.
The great expansion of America's welfare state occurred in the 1960s and 1970s with the creation of Medicare, Medicaid and food stamps. From 1960 to 2010, the share of federal spending going for payments to individuals" (Social Security, food stamps, Medicare and the like) climbed from 26% to 66%. Our elderly population was 13% in 2010; the 2050 estimate is 20%.
Meanwhile, the tax burden barely budged. In 1960, federal taxes were 17.8% of national income (GDP). In 2007, they were 18.5% of GDP. This good fortune reflected falling military spending -- from 52% of federal outlays in 1960 to 20% today -- and solid economic growth that produced ample tax revenues; however, as the size of the government has grown and competition from global markets has increased, economic growth has slowed from an average of 4% in the 1950s to about 4% between 2000-2007 and much less than that since the onset of the recession in December of 2007.
According to IMF figures, Greece’s gross government debt as a percentage of GDP (2011 forecast) stands at 165.6%, up from 105.4% in 2007.
Italy’s government debt now stands at 121.1% of GDP, up from 103.6%.
Portugal’s debt has risen from 68.3% of GDP in 2007 to 106% in 2011.
Even the EU’s second biggest economy, France, is not immune from the debt crisis. France’s government debt is now at 86.9% of GDP, up from 64.2% four years ago.
And the United States is in an even worse situation - with gross government debt as a percentage of GDP standing at a towering 100%, a dramatic increase from the 2007 level of 62.3%.The long-term impact of this debt, both for America and for Europe, will be devastating unless spending is dramatically slashed, entitlement programmes are reformed, and public sector work forces are significantly trimmed. The cradle-to-grave welfare states that dominate the social landscape will ultimately have to be dismantled.
Liberals imply (wrongly) that taxing the rich will solve the long-term budget problem. It won't. For example, the Forbes 400 richest Americans have a collective wealth of $1.5 trillion. If the government simply confiscated everything they own, and turned them into paupers, it would barely cover the one-time 2011 deficit of $1.3 trillion.
Whether Progressives like it or not, we are moving away from a "giveaway government" to a "takeaway" government. Either the American people grow up and their politicians wise-up or my team, the bond vigilantes, will force draconian cuts on all of them. Let me be very clear here: I did not join the "bond vigilante" team because I am a banker or work on Wall Street or have a perverse lust for schadenfreude in this case (I do in most others. LOL!). I joined it because, if the last few years have proven ANYTHING, it is that the Democrats and Republicans in Washington are clearly delusional, willfully blind, and will never work together to make the very politically-suicidal decisions necessary to save the Republic.