The head of the GAO, David Walker, is now saying what I have been saying for years: our government - our nation - is headed toward a major fiscal crisis. We are a nation living vastly beyond our means in almost every possible way, both personal and governmental. We are running up hundreds of billions of dollars in new Federal debt every year on top of the trillions of dollars in unfunded future mandates for social security and medicare, and we are headed into a future where we will have fewer taxpayers to pay off those debts.
Their basic message is this: If the United States government conducts business as usual over the next few decades, a national debt that is already $8.5 trillion could reach $46 trillion or more, adjusted for inflation. That's almost as much as the total net worth of every person in America - Bill Gates, Warren Buffett and those Google guys included.
A hole that big could paralyze the U.S. economy; according to some projections, just the interest payments on a debt that big would be as much as all the taxes the government collects today.
And every year that nothing is done about it, Walker says, the problem grows by $2 trillion to $3 trillion.
In that situation there are only two choices: we can push tax rates through the roof to pay for it all, or we can default. Default on social security and medicare means that tens of millions of elderly Americans won't be able to get the benefits they relied on in their retirement. Default on bond payments means the party is over for us economically for a very long time. And this is just talking about official government debt, which may actually be the less worrisome part.
We also have an immense and growing amount of unfunded and underfunded pension plans in the corporate world, and we're talking hundreds of billions of dollars and growing fast. We're talking major corporations - Ford, Eastman Kodak, Goodyear and many more. If they default on their pension promises, their ability to capitalize through bond issues is gone and their stock value as well. And who will get stuck with the bill? Taxpayers. But with almost as many retirees as workers, the tax burden would be intolerable.
Just last year, United Airlines declared bankruptcy and announced that they cannot honor their pension promises to 121,000 employees. The Pension Benefi Guaranty Corp, a Federal insurer of such pension plans, took on the burden of providing pensions for 235,000 people in just the last year, from over 120 companies who had promised those pensions but didn't fund them. Those people will get only a fraction of what they expected, but what they do get will come right out of your pocket and mine.
On top of all of this, we're also racking up huge personal debts. The average American has over $8000 in credit card debt alone, and more than half only pay the minimum monthly amounts. Those amounts do not pay down the principal balance of the debt, just the interest. With the inevitable increase in taxes to pay for all the debt mentioned above, this will become harder and harder to maintain on a personal level.
The single most irresponsible thing we can do right now is what the government has done over the last few years: institute new entitlement programs that will cost hundreds of billions of dollars, grow the size of government enormously, and cut taxes at the same time so it's not paid for. We are passing a giant IOU on to ourselves and our children for the future and no nation can survive doing that forever. You simply cannot borrow and spend forever, and we are about to reach the limit on our collective credit card.
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And to make things worse?
China's economy is growing at a monstrous rate. When that market crashes, it will come down hard. China's government will be strapped for cash because of decreases in tax revenues. What do they have alot of that can become quick cash? American debt. They can flood the market with American treasury bonds, weakening their value and driving up interest rates.
I posted about this recently, and found some good links you might find relevant. Since die-hard Bushies refuse to give credence to any data cited by anyone who might stink of a liberal, I'm quoting only either conservatives or the government itself -- though of course, since this is something that could be construed as a criticism of the administration, those sources automatically become Liberal America Haters by default (even when the source is the government, oddly):
The Heritage Foundation: This conservative think tank recently published a chart showing the growth in federal spending per household since 1962. Short version, it went down during the last Democratic presidency and way, WAY up since Shrub took office.
The Bureau of the Public Debt: This page shows the current federal debt to the penny, by the government's own accounting.
The Skeptical Optimist: This article argues that debt doesn't matter, it's the percentage of GDP to debt that's important, and in that regard we're fine. However, even given that measure, since 2000, when Bush took office, our debt to GDP ratio (which the skeptical optimist claims is the key figure to consider in financial solvency) has risen from 60% to 64%, above SO's threshhold.
Anyway, just a few links if anyone's interested
Yeah, but we're good for it.
If anyone has collateral to leverage for the sake of investment, it's us.
What should we do? Not allow all this wealth to work for us?
Miguelito raises a very good point. And to take it further, the status quo just gives China leverage against us. While they are unlikely to use it to leverage our policies with Iran, they could use it against us in the future as oil becomes scarce. Whether we are in or near peak oil now or, in fifty years - it will happen and China will have signifigant leverage. In any case, having China holding so much of our economy in their hands is not a good thing no matter how you look at it,
double-soup tuesday -
We're good for it? Show me exactly how good we are for it please. I just don't see how escalating debt is going to help us at all. I am not real keen on passing this spending on to future generations.
The problem with the argument that the only thing that matters is the ratio of debt to GDP is that it ignores the ratio of taxpayers to retirees. Even if the debt to GDP ratio is exactly the same in 2025 as it was in 1950, the distribution of that debt changes significantly because a large portion of it is being paid out to retired people while a smaller number of people has to pay the interest on that debt plus the current cost of government. There are only two possible solutions to that: we're either going to have to raise taxes obscenely high to pay for it, or we're going to have to default somehow (and cutting benefits or means-testing them is defaulting).
Why does the GAO hate America?
Disparaging the state of our economy is only encouraging the terrists to increase their terr tactics in an effort to force us to divert even more money we don't have to the "War on Terr" so that our economy will collapse even sooner.
If you talk smack about the economy, the terrists win. I just hope Bush won't hesitate to take the appropriate measures now legally available to him to deal with these terrist sympathizers.
If we stop borrowing money how will we keep up the appearance that our economy is doing great. If the government only spent what it took in the economy would suck. We must borrow and continue to borrow!!!! When it's time to pay it back, just increase inflation to about 500% per year, then we can pay much less back than we borrowed. See its simple! So what if no one will ever lend the US money again. Plus who cares anyway, all this will affect our kids and grandkids, not us. Let's keep living it up on out childrens back. PARTY TIME!
It doesn't matter whether we're good for it or not. The rapture is coming in our lifetimes and then nobody will care that we were $50 trillion in debt.
Regardless of what China does, the country is in a very deep financial hole, the depth of which will only become apparent to the masses when the country hits a serious financial speed bump. But that's at least a speed bump over which we have some, modest though it may be, influence. But when China's economy hits a speed bump and they need cash, this country will be yanked about and terrorized economically like nothing we've yet seen. Our situation will make the Depression look like carnival mud wrestling. What I fear most is the rise of some kind of neo-fascism--Bushism on steroids wrapped in a flag under a cross.
If that's all that is wrong, well, that's easily solved.
Latin America has a large and rapidly growing population, and large numbers of them want to come live in the USA. All we have to do is admit all comers, and make every last one a hardworking taxpaying citizen (as opposed to the hard-working near slaves we make of them today). Most of them are devout catholics, and come from a culture of big families - so they'll put at least 1 or 2 generations of reversal into the general trend of USA's dropping birthrate as well.
If the problem is a shortage of US Taxpayers, there are plenty of people who want to become US Taxpayers ...
:-)
Just a little nitpicky point - minimum payments do pay down a balance, just not at a rate that'll have it paid off in years and years and years. Usually the minimum payment amount is 2% of the principal. I believe there was a recent change with the credit law changes that raised that to 4%, but I haven't seen it go into effect on my cards yet.
So yeah - a $5 fat and sugar filled cup of Starbucks barely-coffee ends up being something like $12/cup once you finally pay it off if you used a credit card and are only paying the minimum balance and are stuck with a rate somewhere in the mid teens .. but I'm so not feeling sorry for folks who want to pay $5/cup for hot milk and sugar in the first place.
Anyhoo - shut up and keep buying. You deserve the best! Maybe that new Lexus with the "parking system" I've been seeing ... it'll parallel park for you if you have six feet of clearance! How neat is that! You HAVE to have one or everyone's going to think you're a loser.
As already mentioned, China's pretty key. They own us. In turn, I suppose we own them - our need for cheap crap keeps their factories buzzing.
It's all spinning. Makes my head hurt. I go shop now.
llewelly,
<sarcasm>
No, we all just have to convert to Mormonism. They have one of the highest birth rates in the nation, especially the so-called Fundamentalist Latter-Day Saints Church. Once each family has at least seven kids, we can at least hold government to current levels, and grow our way out of this debt. As a double bonus, we don't have to let any beaners in the country.
</sarcasm>
You may have missed this in the Bureau of Public Debt FAQ:
Please follow these important steps to make a contribution to reduce the debt.
1. Make check payable to the Bureau of the Public Debt.
2. In the memo section of the check, notate Gift to reduce Debt Held by the Public.
3. Mail check to -
ATTN DEPT G
BUREAU OF THE PUBLIC DEBT
P O BOX 2188
PARKERSBURG, WV 26106-2188
http://www.publicdebt.treas.gov/opd/opdfaq.htm
ROFL
Felix: What's so funny? You don't think anyone has ever sent a check to that address?
Wasn't this part of the plan the neocons hatched years ago? Basically, the plan was to drive up spending, particularly in the form of corporate subsidies and war spending, while simultaneously cutting taxes in an effort to bankrupt the government, thereby forcing even the most diehard liberals to give up spending on all of the social programs, especially social security and medicare. This would return the country to pre-FDR conditions which is what they want isn't it?
cserpent:
I take such speculations as seriously as I do the religious righters who claim that gays don't want to get married, they really truly just want to destroy marriage.
Of course, the term used to describe these "speculations" ("starve the beast") was invented by David Stockman, Reagan's own budget director, whose memoir of the Reagan administration is widely described (though I myself haven't read it) as outlining the strategy rather baldfacedly. Meanwhile public statements by Republican economic architects of various sorts openly embracing this "speculated" strategy abound, such as this quote from enormously influential Republican thinktanker Grover Norquist in U.S. News and World Report:
Whereas I'm not aware of any particularly influential gay rights advocates actually going on public record as advocating the destruction of marriage (never mind the question of whether anything like any activists analogous in importance to Norquist even exists in the disorganized Democratic party).
But, you know, God forbid Ed ever let it look like he's taking sides on the "conservative vs liberal" thing.
For crying out loud, 80% of what I write here bashes conservatives. That hardly means I have to accept every single criticism of conservatives anyone can come up with. And yes, there are a few whackos among gay rights advocates (and feminists) who say that marriage itself is an artificial construct designed to reinforce the oppressive patriarchal/heterosexualist system. The right quotes a few of those crazies and claims that they speak for all gay rights advocates, which is patently absurd. As for the Nordquist quote, he certainly does not speak for the many conservative intellectuals who have been extremely critical of Bush and the Republican-controlled Congress for their fiscal irresponsibility, some of whom are actively calling for people to vote against Republicans next week to restore divided government and get spending under control. This kind of simplistic demonization is just too simple and easy, and it rarely fits reality.
Ah, but see, that's the thing. Fiscally responsible conservative intellectuals don't have any political power. Grover Norquist does.
china totaly depends upon us for money. anyway the usa is the strongest country ever and i dont think china can ever pass us. if you liberals were really worried about our debt you never seemed bothered when you keep creating new welfare programs. 90% of our debt is from medicaid alone.
Coin-
There are many reasons why I don't buy this conspiracy theory that conservatives are intentionally trying to bankrupt the government. The most obvious is that their campaigns are paid for by corporate America, and corporate America would suffer hugely if that were to happen. The last thing the corporate world wants to see is for the bond market to collapse and the cost of borrowing to go through the roof. Their lifeblood is easy and available credit to finance their growth and an American economic collapse would destroy that. The other obvious fact is that the corporate world is very reliant on big government; the notion that they would want to starve big government is patently absurd. The new medicare prescription drug bill, for example, is not a social program that actually helps the poor and underprivileged, it's a huge payback to campaign contributors; it is corporate welfare. Those who pay for election campaigns do so for exactly that sort of return on their money. Most of the corporate world also has a vested interest in keeping the whole artifice of the welfare state alive, not to destroy it. Corporations become very wealthy from farm subsidies, housing subsidies, school lunch programs, and so forth. The Federal government has become largely one big program for transferring hundreds of billions of dollars from taxpayers into corporate bank accounts. Big government is their golden goose, they sure as hell have no interest in killing that goose off.
Frankly, the whole conspiracy theory is just silly. And that has nothing at all to do with wanting to avoid some appearance of choosing sides, an even more ridiculous claim in light of the fact that at least 80% of what I write, probably more, is bashing conservatives. Opposing much of what conservatism stands for doesn't mean I have to fall for every stupid argument people make against conservatism. I don't think they have any interest in bankrupting the country, nor do I think they eat babies by the light of the full moon, nor do I think the House of Windsor is in cahoots with the Bildeburgers and the Rothschilds to control the world banking system. And the fact that I don't buy into every silly conspiracy theory some crank comes up with doesn't require some ulterior motive, it just requires rationality.
(Said in his best Meryl Streep-Australian-via-Elaine From Seinfeld Voice): "Maybe the RINO ate your baby ..."
There are natural forces - behind human power - driving the role that U.S.A. is playing in this modern world. When JEFF HERBERT point out that "Since die-hard Bushies refuse to give credence to any data..." - what do you think is happening with their minds? They are blind? They loose the rationality? Nope. There are invisible forces behind them.
At Matrix's Theory, the models are showing the designer of those forces. I sorry can not put the models into a computer, if I get it, you would see the forces, easily.
The designer is the creator of the terrestrial biosphere. And this biosphere is a kind of embryo of the designer, so, it is merely an evolutionary reproductive process. The final result would be an entire biosphere system reproducing the designer, which is a natural closed system. Human beings are merely parts - the genes working this re-construction - and the final system (biosphere plus human social system) would be the perfect organic machine that is the designer: the last common ancestor of all living systems.
So, seeing the anatomy of the designer, we find explanations why there is the U.S.A today, why the economy is at this situation, and towards what kind of future we are going to.
The designer is a system composed by a nucleus, plus six functions/tools, whose are mixing for to creates intermediates sub-level tools for to deal with biological complexity. So, we have U.S.A. going to establish as the nucleus, the other six rich nations are going to be the six functions/tools, and the others nations like sub-levels. The observation of these "models" suggests the roles or systemic functions playied by China, Russia, France, etc.
The "body" of the designer has a energetic circuit in shape of a tornadoe. The flow of energy spinning in the vertice of the conic tornadoe makes an circular orbit at the same time that those "tools" at the perypheral locations does it. So, the flow at the nucleus makes a circular orbit in less time than the perypherals, which means that it is "fast". The energy in U.S.A needs flowing at faster speed than the other countries. And, at human social systems, the flow into the circuit is fitted by the substitute/symbol of natural dynamic energy: money,and its economics derivations. It is the explanation of American consumerism and hard working, the money as the building block of the energetic circuit needs running fast at the nucleus. What it means?
U.S.A will be granted by some kind of solution where the other nations will pay its debt. It is the nucleus that holds the "mind" of the system, so, it has the systemic power, so, it will force the other nations to face a solution in some way. No matter what happens, Nature had decided the final destiny: the embryo today will born, naturally.
The biospheric-human society system will be the exactly reproduction of the perfect closed system that is/was the last common ancestor of life at Earth. It is a perfect Paradise, an extraordinary working machine. It is the matrix of astronomic systems, and it is surrounding our world, it is encrypted into our genes.
So, the future will be good for human beings, especially for Americans? Living in the terrestrial reproduction of the Eden, in an automatized fashion way, are there something wrong with it?
At first glance, no. Human beings deserves an optimal circunstance of life. But,... the designer, althought is the most perfect organism possible at material world, he is...totally "stupid". More stupidy than a bacteria. Of course, he is located at evolutionary past times and forms than are the bacterias. So, the mind that will govern our final system will be a kind of "no mind", no "spirit". It eans the government of the Big Brother. So, our final "paradise" at Earth will be the "Brave New World" drive by the "Big Brother".
It is so extraordinary the way that these "invisible forces" makes its jobs, we will show an example: These forces had created Osama been Laden targetting the creation of the Big Brother. So, occurrences as september 11 are obeing subtil plans beyond human abilities.
But, at human beings, arose something that althought was existing into the last ancestor in its primitive shape, got auto-counciousness: the human mind. And the human mind seems that will not support this "paradise".
The mind of the "bushes" and every American, like all human kind, will be prisoner of this kind of paradise. So, we are at a big problem: we need the "technological brave new world" for the welfare of our body, but we need the freedom of our mind also; our mind need be free and stimulated to travel to the deep Cosmos, searching its identity. So, the problem is the government under the "Big Brother". Republicans and democrats are merely tools used by the ancestor's reproduction. We have no human mind free driving its own destiny. We need to wake up, for to find a way of to built the brave new world, but keeping our mind out of its rules. The discoverie and the recognition about the "designer" is a great step, it means that we are counscious about the invisible forces coming from the designer. We need work together, joining all humanity in a great effort, searching the ways for to save our mind. This issue is most important than the current economics details.
The one problem I have with this post is the focus on 'runaway government spending.' In fact, runaway government spending is not the problem in the US. Runaway tax cuts, runaway tax evasion and runaway corporate welfare are.
So far, I have heard three main reasons being played for the US federal deficit: 9/11, the War on Terror, and the Bush tax cuts to the top 10 % of the income distribution coupled with the Bush admin's corporate welfare programs.
Since the first reason is bullcrap and the second reason is a subsidy of the third reason, it seems to me that what should be decried is not so much government spending per se, as it is the destructive and unjust corporate welfare spending and the equally unjust and destructive tax breaks to the obscenely rich.
Universal government-provided health care, for instance, is certainly not beyond the capabilities of the United States - in fact, all the projections I've seen say that it would be both better and cheaper than your current system.
Universal government-provided retirement plans are not an impossibility, if the US is willing to accept a progressive tax structure.
Universal government unemployment insurance is downright beneficial to an economy.
In summary, there are many places where government spending - even the big-government spending that some of the commenters here decry certainly has its place in a modern and well-regulated economy. It's the corporate welfare boondoogles and the tax breaks to the top 10 % earners that you need to get rid of.
Finally, I believe that you are naivé in the extreme if you dismiss a theocon agenda simply because it is objectively insane. Iraq, anyone?
With respect to your objection that the corporate backers that the theocons rely on would bail out on a scheme to bankrupt the federal economy, recall three points:
1) Along the way to disaster, a lot of corporate insiders are going to get very rich off precisely the corporate welfare that contributes to the crisis.
2) Said corporate insiders usually think short term and may or may not act in the best interest of the companies they represent (Enron, anyone?).
3) The companies and slush funds propping up the theocons can - and in fact have in the past - bail from a sinking economy (think Hong Kong, think Argentina, think the SE Asian archipilago).
If there is one thing that the conflict(s) in the Middle East should have taught the world, it is that dealing with people who are utterly insane (and I think that Bushco fall into that category to at least as great an extend as the militant wing of the Palestinians and the Ultraorthodox wing of the Israeli) you cannot expect them to act in the objective best interest of their country, the world, their allies, or even sometimes themselves.
And if there's one thing the Abramoff and Enron affairs should have taught the world, it is that the lobbyists and corporate insiders running D.C. represent themselves first and foremost, with their clients and employers a distant second. The best interest of the United States or, for that matter, the rest of the world, is not even on the scale.
Am I being pessimistic? Certainly. But the history of the last 6 years shows very clearly that it is better to be very pessimistic indeed when dealing with the Shrub administration. Because the pessimists have been dead on the money almost every time. Except, of course, for the occasions where they weren't pessimistic enough.
- JS
JS -
The only thing I'd mention is that any idea that there is a *plan* seems wrong. These guys (the Bush administration) don't really seem to have actual plans other than enriching their donors and invading Iraq.
They cut taxes not as part of some big plan but because it's what they think they should do, and they simply don't think abouut any consequences.
Perhaps the worst part of this is that they can create a faux-prosperity for a short time by combining big-government spending with small-government taxes. It's about as honest as stealing someone's credit card, buying them a meal with it and claiming to be their friend,` but it worked for Regan..
Well said, Andrew Dodds. What really hurts is thinking about would could be given the natural and educational resources of the USA. We could have universal health care and a social safety net, sustainable energy, a green economy .... If only.
Two points of correction:
cserpent: All major tax cuts in the last century has not caused deficits, as they have not caused a reduction in state tax income. This includes the 20's Harding-Coolidge tax cuts, the 63 Kennedy tax cuts and the Reagan tax cuts in the 80's. Only spending increases causes deficits, unless the tax cuts are extreme.
As for you, JS, you really should look at the federal tax income vs the federal expenditure figures. The GWB tax cuts are really quite moderate. BTW the US has a progressive tax structure, both on the federal and state level, but perhaps not progressive enough for some people, hm?
When you have more and more Americans that think they are entitled to the fruits of someone else's labor, and the politicians encourage this way of thinking so they can buy themselves votes, a fiscal disaster is imminent. The founders warned us about this.
@Petlsø: Deficits are caused by the difference between tax in and expenditures out. To the 0th order, tax cuts therefore create or increase deficits or reduce or eliminate surplus just as much as an equivalent amount of spending would.
You have claimed repeatedly - but you have yet to back it up with an analysis that does not say 'Heritage' or 'Cato' all over it - that there are a) Positive higher-order effects of tax cuts and b) that they are more positive than any higher-order effects of increased spending.
- JS
LouisMorelli, your post is highly entertaining and creatively brilliant. Many will consider you a wacko, but I'll admit that your thoughts metaphorically mirror some of my own about our problems as a race and as a biosphere (though I try to stick to more mundane facts and expressions):
The human race has had compassionate and intelligent teachers from the beginning, but all their efforts are constantly being foiled by a few frustratingly immutable facts and all the many complications that are derived from them:
1) The unprincipled have a short-term advantage over the principled; their lies and ruthlessness in gaining power causes them to tend to rise to the top of hierarchical power structures.
2) Being ruled by morally unfit scum, our societies are affected negatively in countless ways, from poor parenting to poor citizenship.
3) Each new generation has to re-learn many of the most important lessons.
4) Psychological change takes time, and our lives are short.
5) Many of the most important lessons concern subjective qualities (like love or values or other psychological elements), and are often therefore somewhat unsolvable by obvious facts or sheer logic.
6) Fear is one of the chief motivators for living creatures, and is used to manipulate us by the unprincipled powerful.
Virtue and reason, like many things valuable, are rare, but all the more worth the struggle. Can we have a highly technological civilzation without draconian control of human free will (however one wants to define that)? I guess one way of looking at it is to ask the question, can Big Brother be theoretically benign?