It is unfair to burden future generations with unfunded obligations. Only the greediest would past this debt to their children and grandchildren.
David Walker, the U.S. Comptroller General, is on a fiscal wakeup tour of the U.S., warning us of our pending fiscal disaster. Walker has added up all the federal government’s income and compared it to all our liabilities and future obligations ($53 trillion) and has concluded that the current level of spending is unsustainable. ($53 trillion is about the total wealth of all the American households)
While Walker is on his wakeup tour, our Congress Critters continue to spending us into bankruptcy. Yes, these are the very same Congress Critters that passed a 3,416-page omnibus spending bill that no one read before passing. The omnibus spending bill bundled 13 individual spending bills into one giant half-trillion-dollar spending bill. So instead of debating and voting on the merits of each item of an agency’s appropriation bill separately, our Congress Critters dumped everything into a single spending bill. Despite the Democrats promises of change, this omnibus spending bill has over 11,000 earmarks. Speaker of the House Nancy Pelosi (D-CA) said this “begins to set us in a New Direction.” Hmmmm!
Earmarks are not audited and have little to no government oversight or accountability, which promotes irresponsible spending. While earmarks are not signally responsible for the $53 trillion of government obligations, earmarks are an indicator of our Congress Critters' lack of fiscal responsibility.
Walker warns us that our Congress Critters have created such a fiscal crisis that if action isn’t taken soon we will be unable to recover. Walker said, “If nothing changes, the federal government's not gonna be able to do much more than pay interest on the mounting debt and some entitlement benefits. It won't have money left for anything else – national defense, homeland security, education, you name it.” While our Congress Critters ignore Walker’s warning – none dispute it.
So, what happens if we can only pay interest on the debt and the creditors that financed the massive spending want their money back? If you borrow from a bank and can’t pay, the bank will force you to liquidate your assets to pay the debt. The same could occur if the U.S. defaults on its loans.
The liquidation of U.S. assets could start with the Interstate Highway System. Imagine that a Saudi-based OPEC consortium assumed control of all our north-south Interstate Highways. The familiar Interstate Highway road sign might indicate ‘OPEC 5’ as we drive north. Also assume that a European-based consortium assumed control of our east-west interstate highways. Then we may see a ‘EURO 10’ sign as we drive east. Of course the new owners of the Interstate Highway system will want a return on their investment so expect all the OPEC/Euro interstate highways to be toll roads.
If losing control of the Interstate Highway system doesn’t pay off the debt we may need to sell airports. Assume an Asian-based consortium assumed control of all our airports and air control system. This embarrassing scenario could continue until all our creditors are paid. We can only hope that we don’t have to surrender our National Parks to Venezuela. Imagine driving up to Yellowstone, the Grand Canyon, or Yosemite and being greeted by a Venezuelan flag and a huge billboard with a picture of a smiling Hugo Chavez.
This nightmare scenario doesn’t have to occur. But to prevent it our Congress Critters have to recognize the existing financial problem and take action. We have a strong economy so we could grow out of this financial crisis but our Congress Critters need to cut spending.
Walker reminds us that we can eliminate all the waste and fraud and the entire Pentagon budget and the problem would still exist. The entitlement programs are bankrupting the country and Congress Critters are afraid to cut them. Our Congress Critters need to reevaluate, means test, and reduce the size of all ‘entitlement’ programs, starting with the Medicare (particularly the 2003 Medicare drug bill), Medicaid, and Social Security.
It is unfair to burden future generations with unfunded obligations. Only the greediest would past this debt to their children and grandchildren.
quixote@covad.net
Read more articles by Jack Ward
I assume you were complaining about this when Reagan was increasing the debt and when GWB was cutting taxes so he could have half-trillion dollar deficits.
Multi-decade extrapolations sound impressive, but are always adjusted well before they become a disaster.
Comment by freelunch | February 12, 2008
freelunch,
The defecits Reagan ran to finance military spending 25 years ago pale in comparison to our total debt and to the defecit today. To blame cutting taxes for the national debt displays your typical ignorance of economic reality. It's not even worth debating with you anymore. Suffice it to say that financing your annual budget through the devaluation of your currency via the inflation tax has the same consequence and is no more favorable. To answer your question though: yes, there were, and are, in fact many conservatives who were appalled at the rampant spending increases, not to mention the bureaucratic expansion, under GWB - Medicaid, No Child Left Behind, the mass-centralization of law enforcement into the "Department of Homeland Security" and the cost of executing two foreign engagements. Had we jacked up taxes, there still would have been a defecit. In fact, since the economy was already in a mild recession when Bush took office, the result of increasing taxes most likely would have been decreased business activity, and the result may have been a net decrease in tax revenue.
In typical fashion, you've hit on the perfect solution to our economic woes: increase taxes, keep spending (or increase spending) on domestic bloat, do away with the military budget, and leave it to later for things to be "adjusted". Flawless!
Comment by Patrick Mulligan | February 12, 2008
Ronald Reagan's tax cuts resulted in record tax receipts for the government. How did that contribute to the deficit? That's like saying your recent raise in pay caused you to get further into debt. It makes no sense.
Comment by denniscampbell | February 12, 2008
Reagan caused huge problems with the economy with the arms buildup against the Soviets. GB Senier had to raise taxes as a result, leading to the famous read my lips clip that helped Clinton win the following election.
There is a difference between the government finances and that of the individual. Individuals by and large did well at the time.
It makes perfect sense.
Comment by Leigh | February 13, 2008
What government finance? Government has no money and businesses do not pay taxes! Even a goverment educated individual should be able to understand these simple facts.
Politicians thrive when they can give things to their constituents thus the concept of earmarks. How are these things paid for? By reaching into your pocket and removing funds unless you are part of the 50% not paying income tax.
Why should we tax those horrible businesses? Because the resultant price increases are blamed on the businesses instead of out of control government spending because our relatively ignorant population cannot see the cause and effect of tax practices on prices. Politicians love "taxing" business because it has great appeal to get the big guy. What a deal for politicians.
The only way we will fix government excess is to dramatically change the tax code by removing the ability to tax anything except consumption and reining in the ability of government to borrow. Of course politicians do not like this type of process because it takes away their ability to buy votes therefore they fight against reform by developing slogans (lies) such as the "poor will pay while the rich get benefits".
Maybe it is time for the consumption tax of the Fair Tax. It is not a sales tax which is added to the price of an item, it is instead a true consumption tax replacing taxes that are already embedded in prices we pay today. The draft Fair Tax legislation is interesting because it will not go into effect until the 16th amendment is repealed. You might ask why the requirement for repeal? Simply put the politicians cannot be trusted to NOT add an income tax to your burden!
What is the second thing politicians most despise about the Fair Tax? It is visible. Even the uneducated or undereducated cannot mistake why their price went up in a Fair Tax world.
Want to make America great and bring jobs back to the USA make us a corporate tax haven.
Comment by Mickey G | February 13, 2008
Patrick, The White House tells us that Reagan's deficits were higher than the Bush deficits in terms of the GDP and almost matched Bush's spending recklessness in constant dollars. See the OMB'sTable 1.2—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS (−) AS PERCENTAGES OF GDP: 1930–2013. The buildup in defense spending does not match the increase in the deficit.
Running deficits is how you get huge debts. Yes, Reagan did hit on big spending as the way to pull out of the recession.
No, Dennis, Reagan's tax cuts did not result in record revenues in any meaningful sense. 1985 revenue finally matched 1981 revenue and the real increase in revenue during Reagan's terms was lower than average revenue growth after WWII.
Comment by freelunch | February 13, 2008
Does anyone recall that the Constitution specifically authorizes only congress to appropriate and spend money? To lay spending at the feet of presidents is ignorant.
Dennis is correct, revenues doubled over the course of Reagan's two terms. Spending increases (not just military, but social programs) far outstripped revenue increases.
For government, it is NEVER a revenue issue. It is always a spending issue. For every dollar of tax increase, the government spent $1.40. Therefore, tax increases only feed the monster and make it spend even more.
I wish I could recklessly spend other peoples' money. Oh the things I could buy!
We might as well talk about Clinton's "surpluses." There never were any. Off budget items like the Social Security Trust Fund are included in revenues by means of substituting the cash in the trust fund with bonds - debt instruments, for those of you who do not know.
The ACTUAL deficit must include the unfunded liability of the Social Security Trust Fund, because those bonds must be paid back.
So, the Clinton surpluses are a paperwork shuffle. The deficit problem was and is much, much worse than we think.
Comment by Mountain Man | February 13, 2008
Mountain Man, good set of comments. The problem we encounter when we attempt to move to a pay as we go process is that the American public has a negative IQ when discussing any economic issue. Most of them believe that the earned income credit is not welfare, and that an economic stimulus package comes from the government rather than from picking the pocket of those few still paying federal income taxes.
Comment by Mickey G | February 14, 2008
Presidents tend to set the tone of spending and have the right to veto. Since they present a budget, there is no reason to excuse them from responsibility for the spending that occurs on their watch.
Receipts in FY 1981 were $599 billion. In FY 1989 they were $991 billion. In constant (2000) dollars that was $1,077 billion for FY 1981 and $1,299 billion in 1989. That represents an increase in revenue in real terms of 2.4% per year. That increase is about half a percent below the long-term average annual increase.
The inflation-adjusted debt (including external debt and debt to trust funds) of the US decreased in FY 1999, 2000, and 2001, Clinton's last three years. The debt increased slightly in nominal terms in those years.
Comment by freelunch | February 14, 2008
The $9.2 trillion dollar debt that we have today includes the money owed to the trust funds.
The current number from US Treasury is as of February 12, 2008. The principal accrued that is held by the public (including foreign) $5,149,882 million and intragovernmental debt holdings are $4,087,050 million.
The cost of meeting future obligations that can be changed by law has not been formally calculated, though even the most optimistic estimates say that the unfunded portion of future commitments is substantially higher than the debt that we have on the books.
Comment by freelunch | February 14, 2008
Wrong, freelunch. The social security trust fund is $2.23 trillion in unfunded liability, which congress SUBTRACTS from the national debt when it ought to be added to it: http://zfacts.com/p/461.html. The corrected national debt including unfunded liabilities is more than $15 trillion.
The constitution gives the authority to authorize spending to the house (article 1, section 7), and the authorization to borrow to the entire congress (article 1, section 8). There is no mention in article 2 (the executive branch) for the president to make the budget.
I am making no excuses on behalf of Reagan. But you are fixing blame for spending on Reagan, making no mention of whose authority it is to spend money. Also, inflation-adjusting budget numbers to 2000 dollars is deceptive and irrelevant to the discussion.
Reagan is frequently blamed by the left for tax cuts ruining the economy. But examining the numbers yields the opposite conclusion. Revenue increased, and it increased at a handsome rate. It was spending, which outstripped revenue growth by a significant amount, that was and is the problem.
But let's get down to it. Increasing revenue is only useful to serve the point that tax cuts do not harm government. But that's where I stop. Successful tax policy is not measured by how well government does. It is measured by how well people and businesses do.
When government is empowered (revenue), people are subordinated to serving the interests of government. When government is limited (the purpose of the constitution), people decide for themselves what to do with their own money.
I want to see government shrunk, and its revenues decline. That is a useful indicator of its success.
Comment by Mountain Man | February 14, 2008
I have not been following this discussion for lack of time. Rather than craft a response that would be redundant with what has already been posted, suffice it to say that I agree whole heartedly with Mountain Man's responses. Well said.
Comment by Patrick Mulligan | February 15, 2008
The bad news is that the national debt is out of sight and out of control. Now for the good news: It is denominated in dollars, which are defacto Federal Reserve Notes these days. What is a FR note? A note is a document saying that someone owes a specific amount of money to someone else. Therefore our money consists of promissory notes, not Constitutional monies, which are defined as coined money of gold or silver. Furthermore, there is no Amendment that makes FR notes valid money of the USA, the phrase on the FRN that this note is valid for all debts public and private is a merely a gratutious assertion by a private nongovernmental organization, that has no basis in the founding documents. Now we have a debt or note, that is denominated in notes, and that constitutes a legal fiction; i.e. the paying of a debt with IOU. This shell game will get untenable sometime this century and the faux financial house of cards will tumble of its own dead weight, a debt that consists of debt instruments give no remedy that consists of the transfer of real money. Since the FR can create dollars out of thin air, and transfer the same monetary "fictions" with the stroke of a computer key, this unpayable debt is destined to be eradicated by the stroke of a computer key in the not too distant future.
One wag said, "Why should I be concerned about the National Debt, how are they going to make me pay it off?"
Comment by weeedley | February 15, 2008
"The Federal Reserve Act (ch. 6, 38 Stat. 251, enacted December 23, 1913, 12 U.S.C. ch.3) is the act of Congress that created the Federal Reserve System, the central banking system of the United States of America, which was signed into law by President Woodrow Wilson."
-wikipedia
Currency duly created by an act of congress and signed into law is invalid how?
Comment by Mountain Man | February 15, 2008
This act of Congress negated a part of the Constitution and to be valid on its face, needed to be passed in the form of Amendment. Section 8. …To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;
Section. 10.
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
Article. V. The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified….
Therefore the FR act, which in effect changed clauses in the Constitution by redefining the essence of legal money, is invalid on its face.
This is but one of the several disasters wrought by the atrocious Woodrow Wilson administration.
Comment by weeedley | February 15, 2008
Do you think that coin must mean something round and made of metal, so then something rectangular and made of paper is unconstitutional?
Comment by Mountain Man | February 15, 2008
MM,
The site you recommended got their facts right. You misrepresented what they said.
Comment by freelunch | February 15, 2008
Freelunch, maybe if you abandoned your agenda for a brief moment to actually look at what they did:
Borrowed by the General Fund – $ 9,257,309,682,950
Saved by the Social Security Trust + $ 2,226,606,486,206
Saved by other Gov. Trust Funds + $ 3,708,532,033,730
——————————————————————————–
Debt Held by the Public (net debt) – $ 5,548,777,649,220
Look at it closely. Do you see the plus marks? That represents a positive balance. Doi you see where it says "net debt?" They are SUBTRACTING the trust funds from the debt! They doing precisely what I accused congress of doing, treating an unfunded liability as an asset.
This site was cited because of the utter falsity of its representation. It was also cited to show you that your numbers were wrong, which they still are.
Comment by Mountain Man | February 15, 2008
The money that the trust funds have exists, it was used to buy Treasuries. That is an internal debt. Notice that everyone agrees on the $9.2 trillion. This statement about debt says _nothing at all_ about unfunded debt. Nothing. The unfunded debt, depending on how calculated is added to the net debt, since most of the unfunded debt is expected to be paid by Social Security and Medicare.
Technically, unfunded debt is not a debt of the country because it has not been authorized yet. I'm sure we both agree that this attitude is silly, but it isn't much different from what businesses did for many years when dealing with their retirement programs.
Comment by freelunch | February 16, 2008
Let me explain again.
The contents of the trust fund is bonds. A bond is a debt instrument that needs to be paid back. Like your mortgage. You owe it. The government owes the money to the trust fund. The trust fund money is transferred to the general fund and spent as soon as it is received.
The effect of this is to make the DEFICIT (the shortage each year) look smaller. That is because social security is off budget (is not included in budget calculations), but the general fund is on budget. Meanwhile, since the money must be paid back some day, the DEBT (the sum total of all deficits) is larger in an amount equal to the money borrowed from the trust fund.
Unfunded debt simply means that there is no money securing the debt. That does not change the fact that the money needs to be paid back. It is irrelevant that it is not authorized. The entire point is that the DEBT is larger than advertised, and that there is no money in the trust fund, only bonds.
terminology gymnastics aside, my point stands.
Comment by Mountain Man | February 16, 2008