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The social engineering agenda of the Pelosi/Reid/Obama Democrats will double the $13-Trillion USA National Debt by 2025, and triple it by 2033.
Already a staggering 100%, the ratio of National Debt to GDP is poised to attain the 200% threshold in 2035. This reality has played heavy in the USDollar's secular decline of 3.2%/yr from 2004 to 2007. Interrupted by Russia's incursion into Georgia and the Credit Crisis, the long term pattern re-emerged in March 2009 and it is probable that the USA:EUR index will drop to 0.51 over the next three years from 0.73 today ... a debasement rate of 11% per annum.
Rising Debt interest, unfunded Social Security liabilities, Entitlements for Medicare/Medicaid and the strive for Universal Health Care will drive the National Debt to $62-Trillion over the next 30 years.
On a brighter note, albeit the 2010 $1.3-Trillion Budget Deficit represents 11% of GDP, CBO analysis indicates it will decline to 3% by 2015. This metric virtually guarantees future Treasury sales on both the domestic & International stages, although at perhaps ever rising yields to investors. Not so pretty is the escalation of that ratio to a horrendous 17% by 2040. Somewhere along the way, Congress is likely to have its credit card cancelled. Many are vocal this week that Greece's 13% Deficit/GDP ratio is outrageous. Well, the American Federal Gov't will reach that mark in 2036.
On the positive side, the string of Export records seen in 2007 should resurface in 2011 as importers see nicer prices. Manufacturing could also surprise when domestic consumers start to shun high priced foreign goods and ever increasing transportation costs of those products.
The Pelosi-Reid-Obama Budget has shined a light on the structural deficit issue. The problem started long ago. Hopefully, closer Media & think-tank scrutiny will spawn anticipatory action by a more fiscally responsible Congress. If not, current CBO data indicates that left unchecked, the annual Deficit rockets to $4.2-Trillion by 2030, $7-Trillion by 2050 & $23-Trillion by 2080. Meanwhile, the National Debt surges to $116-Trillion & $533-Trillion respectively by the latter two dates.
The scenario above is defined by legacy legislation and ramifications of the Obama 2010-2020 Budget. Over the long term, it will never be allowed to happen. As we saw in Canada in the early 90's, program spending will be the eventual victim of these structural Budget Deficits. Ever larger annual Debt Servicing forces the Gov't-of-the-day into a realm of cuts in services and/or the raising of taxes. While populism affords the Obama Administration the ability to tax upper incomes today, eventually realities of the Laffer Curve will force policy makers to spread the taxation among the "other 95%" or pare back program spending. One of the first taxes will be a 2% hike in payroll withholdings to rectify the expected shortfall in Social Security obligations from 2017 to 2057.
Source: Congressional Budget Office (Note: The extended-baseline scenario adheres closely to current law, following CBO’s 10-year baseline budget projections from 2009 to 2019 and then extending the baseline concept for the rest of the projection period. The alternative fiscal scenario deviates from CBO’s baseline projections, beginning in 2010, by incorporating some changes in policy that are widely expected to occur and that policymakers have regularly made in the past.)
Disclosure: "no stocks mentioned"