The United States will Follow in Europe's Path

I am in Washington DC and decided to see the Newseum. One of the great exhibits they have is on a daily basis they post the front page of 800 newspapers from the U.S. and abroad. All the papers cover local news but every paper in this country today mentioned the debt fiasco going on in Congress. The Republicans have proposed to take away Congress's ability to raise the debt ceiling and leave the decision in the President's hands. This is just another political game.

The Republicans want to cut this country's debt load by at least $4 trillion over 10 years strictly though cost cutting measures while the President is willing to also have the same level of debt reduction as long as we increase taxes. This battle is at a stalemate and the Republican suggestion to try and pass a $2 trillion bill will not be sufficient.

The United States is a bankrupt nation but nobody in Government wants to admit it. Last year Ireland needed to be rescued and today Greece is spewing debt and facing a possible default. This week Italy's financial condition caused the markets to tumble. Portugal and Spain could be next in line. If the United States were a member of the EU, the financial gurus would be pounding on their debt and yields on treasuries would be much higher. Nobody would be as concerned with the technical default of our debt limit because the true worry would be too much debt and not enough revenues. Sound familiar?

The U.S. has been a financial powerhouse for the last 70 years and we have been the world's lender of last resort. Times have changed and we need to clean up our own fiscal mess. We can't pay our current bills and our kids won't be able to pay the future bills. Congress needs to wake up and forget politics before the United States becomes Greece. Social Security is broken and so is Medicare and Medicaid. We can no longer afford to protect the world so let's cut defense. Let's re-examine subsidies like ethanol and other farm subsidies. In this light, oil tax preferences may also have to be chopped. With our economy floundering and Bernanke discussing QE3, it might not make sense to raise tax rates but moving to a flat tax could clearly generate more revenues.

Washington needs to change and somebody needs to sit Nancy Pelosi down and teach her basic economics. Today's headlines have her fighting with her own party by telling the President that she won't cut any of the entitlement programs. Where does she think the money is coming to pay Social Security? Can someone possibly be so blind to reality or just so self-serving that it is worth sacrificing her own country's future?

The United States looks like one of those troubled European countries and unless Congress gets it's act together, the dollar will crash, treasury prices will plummet, a default will be in the cards, and the next financial crises will be upon us.