Digging our Hole
Digging our Hole
4/15/2010
The laughter from recent talk shows and from comedians about the politics and economy is like the laughter of looking at your scraped knee and bruised arm after an accident that totaled your car. We all are laughing at our scraped knee while the economy has been totaled and traffic has turned into a suicide ride. What we don’t see now are the massive internal injuries that will hurt us in the future.
Greenspan, Paulson and Bernaki made some huge mistakes but no one in Washington knew any better or understood more so we all blindly followed these financial “leaders” down a path that ended in a lot of poor, at best, results. Whether or not the bias of being former Wall Street competitors or seeking political favor skewed their judgment is something we will debate about. Even they admitted that they just did not know what to do so they did the only thing they could - based their decisions on the actions and mistakes from 1933 - which proved to be mostly the wrong moves.
We are in a DEEP hole!
Most people do not understand how big a hole we are in. The facts remain that our total national debt is well over $12 trillion and is growing by $3.7 billion per day. We collected about $1.5 trillion per year in taxes over the past 10 years. Since the time of having a budget surplus under Carter, we have spent a total of about $27 trillion! The actual taxes collected in the past 10 years covers only 5 years and 7 months of our spending. The remaining 4 years and 5 months has been “financed” with debt. Debt that must eventually be paid back and that has interest payments. The Congressional Budget Office estimates that total additional national debt will grow by $9.3 trillion over the next decade. That will put the total national debt at just over $21 trillion by 2020. That will cost about $865 billion per year in just interest payments on the debt.
STOP Digging!!
The consequences of Greenspan, Paulson, Bernaki,. Bush and Cheney have already created a huge loss of jobs, homes and industries and that is at a time when we are still spending - digging the hole deeper. We have been digging ourselves into a hole for years. Amazingly, the proposed solution is to dig further. When we finally stop digging, the job of filling in the hole, to bring us back to a balanced budget, will be such a huge task, it will take decades of a lot of pain and effort to resolve
Digging Deeper
We know that the retiring baby boomers will boost medical costs and social security costs at a rate faster than we can reasonably increase taxes in a slow economy and too much taxes will actually increase the need for government subsidies. Any investment in oil-independence will cost billions or more. The crumbling national infrastructure of roads, bridges and water pipelines will cost billions or more. The edge that our military has must be maintained and updated and that will cost billions. We can reasonably expect there to be other unexpected costs and new wars over the next 10-15 years. The dollar will likely lose value in the international market making foreign goods and raw materials more expensive - especially oil - jacking up the price of almost everything else. We can only hope that global warming, natural disasters and limited fresh water reserves will not enter the picture until we can afford them - but they are on their own schedules. The hole we are in will be getting deeper for at least the next 10-12 years.
Filling in the Hole
So what does the future hold? Our medical care will have to be partly nationalized in order to be able to cut it back to some level that might be able to be funded. They will, of course, begin with the civil service and military retirees since they are already under the government’s control. Social Security will be cut back by using a “means test” that will reduce SS if you have other income - like military retirement or a company pension. COLA adjustments to SS, pensions, retired pay and other government payments will consistently be just a little behind the actual cost of living increases putting millions on a slow downward slope toward poverty. Taxes will increase on a massive scale but our politicians, and especially Obama, will work overtime trying to hide that fact or disguise it or to make it sound “fair”. The rich will pay more. The caps on salary that pay SS will be lifted. Taxes will be put on all sorts of transactions that were not there before - road taxes, bridge taxes, fuel taxes, etc. They will hide taxes as “fees” or “co-pays” to make it sound nicer. We can reasonably expect to get the national debt paid off and get back to a normal and stable economy around the middle of this century - about the time our most recent high school graduates begin thinking of retiring.
…..but of course, I am an optimist and the reality could be much worse….