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A Choice That Will Change Your Kids' Lives

By Dr. Steve Sjuggerud
Wednesday, April 27, 2011

"What's that?" my 10-year-old asked last night.
The National Debt Clock was ticking away on the Evening News... $14 trillion and counting, fast.
My wife and I broke the news to him: That's what he and his generation will have to work to pay back.
"But why?" he asked.
I explained it this way to the kids...
"Which person would you vote for? Someone who promises to give you lollipops every day at school, even though he can't afford them... or someone who says he needs to take your desks away for the year because we can't afford them?"
"I'd vote for the lollipops guy!" my eight-year-old piped in.
"Well, that's what's been happening for decades..." I said. "People have been voting for the lollipops guy. But now we don't have the money to buy any more lollipops. The government now owes $14 trillion."
"Well, how do we fix that?" they asked.
"Here's what I think should happen..." I said. "As a good person, you need to keep your promises. So if someone earned lollipops this year, they should get them. But if you don't have any money to buy lollipops in the future, you have to stop promising to give away lollipops."
"Well, why don't they just do that?" my kids asked. "Why don't they stop promising to give us lollipops?"
"We're hoping they do..."
As he heads toward reelection, President Obama has a choice to make:
1. He can stop promising lollipops for everyone in the future.
2. He can act like decades of politicians before him looking to get reelected and promise "Lollipops for everyone, always!"
The choice should be easy. The credit card is maxed out. (You'd think a $14 trillion limit credit limit would have been enough.)
With all this government spending, we've strayed a long way from what our Founding Fathers laid out. Take a look:
Federal Government Spending as a Percent of GDP
This chart (from the excellent report "USA Inc." by Mary Meeker) shows how government spending has soared in America... It has climbed from 3% of GDP in 1930 to 24% of GDP today. (The upward blips in spending in history were the major wars.)
Everyone knows what the problem is. It's entitlements... future lollipops. Here's another chart from Mary Meeker. You can see entitlement spending has grown eleven-fold in 45 years:
Entitlement Spending Increased 11x Over Past 45 Years 
The trajectory is terrible.
If nothing is done, by 2025, entitlements (plus interest payments on the debt) will eat up all the government's revenue. You can see it in this final chart:
Entitlement Spending + Interest Payments Exceed Total US Revenue
In short, it's time to get rid of the lollipops. Our credit card is maxed out anyway. We have no choice.
I'm certain my generation and my kids' generation won't miss what we never had anyway...
Steve Sjuggerud

Further Reading:

For two years, Porter Stansberry has been writing about the country's growing and unsustainable levels of debt... Check out his recent four-part series on what's happening, why it's happening, and how you can protect yourself here:
"Dozens of well-connected companies received billions in bailout money from the Fed – deals the central bank never disclosed to Congress or the press..."
"The only way out is for the Greeks to inflate the debt away – effectively stealing from their creditors with a printing press."
"Today, most Americans have no idea that the foundations of our modern State are based – nearly verbatim – on the demands of Karl Marx's Communist Manifesto."
"We are not going to have a crisis. We are in a crisis right now. What's the best way to protect yourself?"

Market Notes


Our "high horsepower" economic indicator just "broke out"... in grand fashion.
Longtime DailyWealth readers know we follow a handful of vital companies, commodities, and investment funds for a "real world" take on the global economy. One of these companies is Cummins (CMI)... the world's largest independent manufacturer of the diesel engines that power bulldozers, heavy trucks, cranes, generators, and mining shovels. Its share price rises and falls with the pace of economic and infrastructure activity.
For example, we raised a red flag after CMI's big breakdown in January 2008, which came well before the economic crisis. This week, however, Cummins didn't break down... It struck an all-time high. The company just reported terrific earnings... driven chiefly by booming international markets like China, Brazil, and India.
When we see this "super strength" from the likes of Cummins, we say, sure, there are threats facing the global economic recovery right now (government debt and government debt being the two biggest)... but as long as companies like CMI are enjoying surging profits and share prices, things "can't be all that bad"...

Cummins rips to a new all-time high

In The Daily Crux

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