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Staggering National Debt Looms
"The rich rules over the poor, and the borrower becomes the lender’s slave" (Proverbs 22:7)
In the late 80s and early 90s I read several reports and a book about the looming national debt. One prognosticator said that 1995 was the year the debt would reach a crisis level. A crisis did not occur, in fact the economy seemed to do quite well.
Perhaps a bullet was dodged. Now, as the reported dept nears the $7.4 trillion ceiling USA Today reports that the financial obligations of United States taxpayers are a staggering $53 trillion.
The worst-case scenario is a sudden crisis — perhaps a major terrorist attack or a shutoff of oil from the Middle East — that triggers a loss of confidence by investors in the U.S. economy. Foreign investors refuse to lend more money to the government to finance its deficits; drastic tax increases and benefit cuts occur suddenly; the dollar's value plummets, which raises the cost of imported goods; and a severe recession or depression results from falling incomes.
A softer landing: The USA acts swiftly and becomes more like Europe. Taxes are higher, retirement benefits are less generous but widely distributed; health care costs are controlled; and the economy is sound but less productive.
Big payments on the debt start coming due in 2008, when the first of 78 million baby boomers — the generation born from 1946 to 1964 — qualify at age 62 for early retirement benefits from Social Security. The costs start mushrooming in 2011, when the first boomers turn 65 and qualify for taxpayer-funded Medicare.
I don't like the solution that has been offered by the MSM because it represents an acceleration of the U.S. into socialism. There are other routes to discuss in future posts but none will be attractive to the common taxpayer. Debt enslaves a nation the same way drugs takeover an addict. Coming off the addiction is generally very painful and in the end the U.S. simply has to pay off the debt it incurred and change its ways to avoid future enslavements.
Politicians embrace the Keynsian spend and spend to grow philosophy because it enables them to make promises that lead to their election [here's an example]. However, the burden of overspending is passed to the future and can only be repeated until the tax liability becomes too great to service it. In the case of personal debt, this point is called "bankruptcy". In the case of national debt, this point is called a "crash". Consequently, Bush and Kerry have been relatively quiet on the National Debt and few bloggers are picking up the USA Today Story.
See also USA Today's follow-up article.
The federal government would have to double taxation or cut benefits in half immediately to make good on its promises of providing health care and pension benefits for retirees in the coming decades. Both major political parties and the presidential candidates have avoided confronting the problem for fear of angering voters.
"It's a game of chicken, and nobody's moving even though we have a crash coming," says economist C. Eugene Steuerle of the Urban Institute, a research organization in Washington, D.C.
Posted by tim at October 5, 2004 11:57 AM
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