We "know" the "officially" recognized U.S. government debt by our politicians is $16 trillion, going on $17 trillion. We also "know" that cities and states are required to balance their books. Similarly do we "know" that as workers we pay for our own Social Security and Medicare" benefits during our working years.' We also "know" that ObamaCare will provide health care for more Americans and save money at the same time, thus reducing government spending and deficits. And finally, we "know" that government is there to serve us and that stimulus spending by government is beneficial to economic growth and American prosperity.
The facts are otherwise, of course. These "known" pieces of political propaganda and conventional wisdom are fundamentally untrue.
Let's begin with a few basic numbers. Instead of our various governments, and therefore taxpayers, being $16 trillion in debt, it's closer to $238 trillion and growing each day.
But how much is $238 trillion? Well, if we were to borrow that $238 billion at 4% interest, that amounts to almost $10 trillion in required annual interest payments without paying off one single dollar of the total indebtedness. Currently federal tax receipts are considerably less than $3 trillion annually and federal expenditures are less than $4 trillion annually.
Adding another $10 trillion to the annual government spending or citizens' tax bills would blow the budget deficits completely out of sight and obviously be a killer economicially, but that's the path we're on with our American dysfunctional political system.
And since we have no realistic immediate, intermediate or even long term plans to reduce that indebtedness, the indebtedness will only grow. Until default, depression, inflation, real strong economic growth led by the private sector or some combination of those things occurs.
Am I being an alarmist? Probably. But am I painting an unfair picture? Definitely not, at least in my opinion, but consider the facts and then judge for yourself, please.
A Jeremiad to Heed is subtitled 'U.S. future obligations exceeed future revenues by $200 trillion, and state and local governments face $38 trillion in unfunded obligations.'
This all reminds me of what former Illinois Senator Everett Dirksen reportedly once said tongue-in-cheek about excessive government spending and deficits, "a billion here, a billion there, and pretty soon you're talking real money." Well, today we need to substitute TRILLION for BILLION to deliver the same message.
Will the Dirksens of today continue to be ignored? Not for much longer, I would argue. The day of reckoning with our indebtedness is nigh. Let's see what Niall Ferguson has to say in his new book "The Great Degeneration":
"Doomsayers are never popular, but sometimes they're right. The original jeremiads uttered by the biblical prophet Jeremiah were on the money. His fellow Judeans were vanquished and enslaved by the Babylonians, just as he had warned. Moral: Don't take jeremiads lightly.
That maxim applies to the writings of the economic historian Niall Ferguson....
With a focus on the United States, "The Great Degeneration" warns that Western civilization has entered into a period of decline due mainly to the strangling of private initiative by the ever-encroaching state. "We are living through a profound crisis of the institutions that were the keys to our previous success—not only economic, but also political and cultural—as a civilization," he writes.
The threatened institutions are representative government, the free market, the rule of law and civil society. Mr. Ferguson is dismayed at the explosion of public debt, the destruction of markets by excessive regulation, the replacement of the rule of law by "a rule of lawyers," and the decay of civil society as represented in part by the decline of thousands of private, voluntary organizations (Rotarians, Elks, et al.) that have contributed so much to social order and progress in America. . . .
The most worrisome evidence of decline, he believes, is the "crisis of public debt," with government budgets out of control in the U.S. and Europe. He sees outsize debt as a symptom of the "betrayal of future generations: a breach of Edmund Burke's social contract between the present and the future." Should this news leak out to college-bound American youths they might well be moved by resentment to challenge the progressive orthodoxies that infest so many campuses.
When it comes to health care and Social Security in its various forms, it is not at all clear that the government will be able to keep its promises. By Mr. Ferguson's reckoning, U.S. future obligations under present law exceed future revenues by $200 trillion (calculated at current value), "nearly thirteen times the debt as stated by the U.S. Treasury." That figure doesn't include the unfunded obligations of state and local governments, estimated at $38 trillion.
Of course, future obligations stretch over many years, and the burden consists mainly of debt service, not the debt itself. But the numbers are so huge that just the carrying charges will likely make them unmanageable without painful adjustments. One adjustment that already seems inevitable is a reduction of Medicare and Social Security benefits to future generations. The Federal Reserve also has a solution—inflation, yet another form of pain. And then there is the Obama all-purpose remedy, higher taxes. One way or another, tomorrow's citizens will pay for today's excesses. . . .
The author's argument that civil society is undergoing decay is no less depressing. As government has grown, civil society has withered, he asserts. Robert Putnam's "Bowling Alone" (2000) recorded a sharp decline in participation in civic organizations between the 1960s and late 1990s—for example, a 61% drop in PTA membership. The French author Alexis de Tocqueville marveled at the scope of American civil society in the 19th century, the many associations that owed their "birth and development" not to law but to individuals freely joining forces. Mr. Ferguson agrees with Tocqueville that "the state—with its seductive promise of 'security from the cradle to the grave'—was the real enemy of civil society.". . .
"The Great Degeneration" won't be popular in the Obama White House or other centers of power."
Whether it's $100 trillion, $238 trillion or some higher number approaching $300 trillion, the debt we owe is nowhere near $16 trillion. It's many multiples thereof, and that's real money indeed.
And it's a real problem too, even if we continue to ignore it for now and try to "stimulate" the moribund U.S. economy out of its sleep state.
And our indebtedness dilemma is definitely one that can't be lessened by more government spending.
In fact, more government "help" will only make what seems an impossible problem now an even greater one for the future taxpayers and citizens of America. It's sure some legacy we're leaving them.
That's my take.