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The government spends an extraordinary amount of money. All of that money, however, can be categorized as either discretionary or mandatory expenditures.

Discretionary expenditures are those which Congress can raise, lower, eliminate, increase, or otherwise deal with in accordance with current circumstances. Mandatory expenditures include items such as Medicare, Medicaid, Social Security benefits, other entitlements, and interest on the national debt which are legally bound to be paid. Currently, more than half of the federal budget is comprised of mandatory expenditures.

With a current 2009 federal budget of $3.1 trillion with roughly $1.9 trillion in mandatory expenditures, it is no wonder why the national debt is sky-rocketing (now approaching $11.5 trillion). Given the current state of the economy, one would be hard pressed to assume that U.S. taxpayers can, realistically, contribute more than the $2.7 trillion they are being called upon to support the 2009 federal budget.

The basic, fundamental issue here is that the mandatory expenditures that have been promised by the federal government can not possibly be sustained in the future (never mind the increased discretionary costs related to all other government expenditures).

While the country was buzzing about Bernie Madoff's sentencing yesterday, Americans should understand that Uncle Sam's own "Ponzi-scheme" that is about to unravel will dwarf the devastation cause by Bernie Madoff.

The current housing and mortgage crisis is just the beginning.

- Ed Smith, Publisher
The EHS Letter Manual