Your Debt
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“Hand over $42,000 grandma,” said Rham Emanuel, casting his perpetually sinister snarl at your nana, thrusting his hand in her drooping bra while rummaging through her private depository.
Though believable, this Rham report has not occurred, though I have few doubts that the resident White House weasel enjoys groping old ladies (as well as young boys and small farm animals). But your grandma, grandpa, son, daughter, wife, neighbor and you owe $42,000 thanks to many Congresses who mismanaged your money. And odds are Uncle Sugar will collect in the coming years because the American fiscal house of cards is ready to collapse.
That is what thirteen trillion dollars of accumulated debt will get you.
It is no secret that trusting congress with money is like trusting Al Qaeda with nukes – little good can come of it. Over the years politicians have financed everything from submarines to farm subsidies with borrowed bucks. In quainter times Senator Everett Dirksen allegedly quipped about the mounting federal debt “A billion here, a billion there, pretty soon, you’re talking real money.” Those billions added up and the Fedz started talking trillions.
Then came Bush and Obama, two peas in the spendthrift pod, and all semblances of fiscal sanity vanished without a trace.
Between Bush’s utterly unconstitutional bank bail-out and Obama’s trillion dollar slush fund (known to his acolytes as stimulus), your shared debt rose about two trillion dollars (a 15% bump) in less than a year’s time. All this excludes for the moment an even larger annual deficit from Barack’s scheduled subsidized healthcare system, which will make current deficits appear miserly by comparison. All in all, the defined federal budget has you in hock up to your nostrils.
That’s the “good” news.
Lost in mind-numbing numbers – so large that they defy comprehension – are temporarily solvent programs soon to go bust. For a few decades Congress feared voter wrath over unbalanced budgets. They covered deficits by borrowing from the Social Security cash horde. This maneuver made it appear that the budget was balanced (it was not). About six years from now, the last of the cash in Al Gore’s fabled lock box will be spent. After that the only way grandma will get her monthly remuneration will be for the Social Security administration to collect on the IOUs congress wrote – the same congress that racked-up thirteen trillion in debt and blessed the Bush/Obama spending sprees.
That’s the “good” news.
Medicare is in worse shape. Even after Obamacare adjustments, the system has $38 trillion in unfunded obligations, or roughly three times the current debt. Your accumulated Medicare payroll taxes will be depleted within a decade and the only way to buy grandma a new hip will be either out of your own pocket, or for the federal government to go even further into debt. No amount of economic growth and associated tax revenues can counter the growing Social Security and Medicare outflow.
That’s the “good” news.
Without cutting benefits and budgets, the interest on the debt is scheduled to equal annual Social Security and Medicare outlays in less than two decades (to put painful perspective on that, if you have a baby this year, the interest on the federal debt will be as large as either unfunded Social Security outlays or unfunded Medicare outlays by the time your baby exits college). That’s the bad news. Since Medicare and Social Security are functionally insolvent, they will likely add to the budget deficit in the coming years since no congressman has the spine to take money away from old ladies and opt for deeper indebtedness.
They remember cat food.
In the Carter years, inflation was growing faster than kudzu. Old folk on fixed incomes were known to eat Tender Vittles because that was preferable to going hungry. Politicians rapidly enacted Social Security cost of living increases tied to inflation, which had the unappetizing effect of draining Social Security funds faster. Some protested and suggested reigning in entitlement spending. The lesson learned by a few former congress critters was that threatening to reduce support for old people was a fast path to the unemployment line. The odds of future congresses cutting grandma’s monthly stipend are somewhere south of zero.
In short order Congress will either have to massively cut spending, hike taxes to stratospheric levels, or go even deeper in debt. More debt is not an option. Recent events in Greece show that there is a limit to sovereign debt, and once America’s credit rating slides, the cost of borrowing will rise and adding debt will be both difficult and expensive, leading the United States into the same debt death spiral the Greeks endured. Raising taxes causes economies to grind to a halt as less money remains for investing in business, employment and consumption. That leaves eviscerating the federal government itself, which I would endorse even if the budget were perpetually balanced. But as always, those who suckle the federal teat will bite hard to keep the milk flowing. Like calves that refuse to wean, you have to drag them from the utter and isolate them in a holding pen.
Congress may eventually slash budgetary perks to save grandma, their jobs, and avoid Zimbabwean sized inflation. So farewell welfare. Adieu unemployment. Hasta la vista health and human services. Adios agriculture department. Nice to know ya NASA. Toodle-oo Department of Transportation. Later labor. Ciao foreign aid … Hmmmm. Maybe I should become an Obama backer. His extravagances may force scraping of most of the federal government.
That’s the good news.
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