Many think
our US debt level is too high and a threat to our future and yet others believe
this debt can be managed. The division of opinion appears to be drawn along
ideological lines. So, how serious is our debt and is it a threat to our
economy and future?
The current
national debt as of Sep 5, 2014 is $17.718 trillion dollars. This works out to
$55,577 dollars per citizen and $152,009 to the average taxpayer. [numbers come
from usdebtclock.org] But who is liable for this debt? Tax liabilities of the
Federal sort are bared by taxpayers and most of the debt must be pushed off on
the top ½ of our wage earners and so-called ‘rich.’ The rich are famous for
avoiding taxes so there is probably no way that this debt will be paid off by
them. The middle class will take the hit as usual if history guides us.
Since 2008,
we have been told that we can ‘grow out of debt’ with a strong economy and that
assumes a GDP growth greater than 3.5% per year. The problem here is that the
CBO, this week, downgraded the US GDP growth to a paltry 1.5% of that metric.
That is only $252 billion dollars. But, we spend in deficit and the current
deficit is $559 [I shorten this to billions from now on unless otherwise
specified] and the interest on the debt is $234. With our growth of $252
billion what fraction of this can we tax and use to pay down some debt? Almost
nothing. We could barely cover the $232 of debt service if we taxed nearly all
of our apparent and questionable growth increase. Clearly, this is not working
and we are going broke. The net debt-to-GDP ratio is now 105.5% and Greece went
down at 140% and so did Ireland and Cyprus and soon we may see Italy going down
too. We are creeping up slowly to debt ratios that will debase our currency or
undermine our credit or both. We face catastrophic inflation or defaults or
both.
What is going
on? Why are we not addressing this problem? Part of the problem is the liberal
political notion that we must ‘redistribute the wealth’ and that means taxing
or confiscating the wealth of the rich and giving it to the poor. We are told
we need to double the minimum wage. Large corporations own trillions in assets.
Corporate assets are $19 trillion and that is larger than the debt, but how
much of this can we take and still have employment? Note that there is plenty
of money to take from the capitalists if we get too deep into debt. But private
debt is $16.483—larger than the total national debt—and we should include
Social Security [$15.835] and Prescription Drug [$20.989] and Medicare
[$81.233] for a total unfunded liability of $118.047. That puts the unit
taxpayer liability of $1.02 million dollars per taxpayer! Nobody can fund this
debt since our economy would collapse.
It is a
tragedy that GDP [gross domestic product] is calculated as C + I +G where G is
government spending, C is consumption and I is investment. As such, we can tag
a certain fraction of government spending as a contribution to GDP but we must
realize that this is actually debt funded. This is an outrage. Real growth can
only be derived from the taxed salaries and fees upon new jobs and new
businesses. We have no real growth so the current 1.5% growth rate for GDP is
swamped by our massive deficits. It is only more debt and not real. Our
Civilian labor force participation rate has fallen from 66% in 2004 to below
63% now. We are employing a lower fraction of our population that we did even a
decade ago.
Why the lax
nature of the political left liberals on this issue? Is it that they really
believe there is some way to grow out of this mess even though the most
optimist mathematical calculations show this is impossible? Is it because they
think that if the system crashed like something that happened in 2008, or even
worse, they can shout: “Capitalism has Failed” and they will win in the
ballots, polls or streets?
The debt is
now intractable and there is no way to pay it off or even stop or slow down is
cancerous progress. We are letting the progressive left undermine our wealth
and certainly that of our children and later offspring. If this is a war then
the progressive liberals have already won the final battle.
