What we are seeing is not a Bush legacy and has little to nothing to do with Obama, Bush, Cheney, etc. What we are seeing is a series of Ponzi schemes coming to an end. These Ponzi schemes started in the thirties with Social Security. The voters then voted themselves a retirement that would be paid for by their children; later their children would pay for their children’s retirements and so on and so forth. Today social security is going broke and we are projected that not too far in the future we will have only two workers for each retired person.

The second great Ponzi scheme was retirement plans for government employees. This started after WWII. These retirement programs have never been funded and have continued to be paid out of general revenues. Today, we have a 37 Trillion dollar unfunded liability that we are trying to leave to the next generation.

The third great Ponzi scheme was Medicare, started in the 1960's. Again a generation decided to fund its expenses, in this case medical, by taxing its children. The children could then tax their children, and so on. I made a somewhat more expanded post on the Medicare problem, but the long and short of it is that Medicare paid out more in 2009 than it took in from Medicare taxes and the trust fund. This situation continues to get worse. By 2014, Medicare payouts will be double Medicare revenues. The shortfall, approximately 1 Trillion dollars per year will be added to the already projected deficit of 9 trillion plus. It will simply get worse after that.

Similar Ponzi schemes have been bringing down corporations (General Motors for example) and state and local governments. This nations most prosperous state, California, has an economy that is slightly more than 20% of the US economy and larger than all but a few countries. As we all know, California is on the brink of declaring bankruptcy. Cities, particularly in California have started to declare bankruptcy.

There is no doubt that our decline has been hastened by three events: (1) the stock market crash near the end of the Clinton administration that not only wiped out a great deal of personal wealth, but put and end to the budget surpluses - no capital gains, no payments to the Treasury; (2) The attacks of 9/11. This not only threw the economy into a tailspin, it required significantly increase government expenditures for security; (3) the costs for the wars in Iraq and Afghanistan. These while they may or may not have been necessary - aggravated the problem, it did not and could not undo the sweeping deficits that will be caused by these Ponzi schemes. To put it perspective, the Iraq war will add less to the deficit than will be added by Medicare each and every year starting with 2013 and going forward.

Whether or not, the US, as a nation, can undo the damage being caused by these Ponzi schemes is yet to be determined. To date, no leader has come forward dealing with these honestly. To his credit, George Bush, tried for a small reform in Social Security that would have permitted something, admittedly not much, to be left over for our grandchildren. He was loudly booed in his address to Congress for proposing such a thing. None of the reforms being proposed today from either side of the aisle admit to and face these problems.

Like any other Ponzi scheme, our government's programs have been designed to let the 'early' investors profit at the expense of the follow-on investors. In this case, it was much longer range - those of us who comprised the 'greatest generation' and those born before 1945 have been the beneficiaries of these schemes. The money pot has run dry and our children and grandchildren will suffer as a result.