It is our national debt!

June 9, 2013

Our national debt

Our national debt of nearly $17 trillion is incomprehensible to most of us. What follows is my attempt to put our debt (and it is our debt!) in perspective.

Our national debt is actually even larger because we have also accumulated state and local government debts of another $3 trillion. And, to make it worse, our citizen's accumulated personal debt is nearly equal to our federal debt. So, our true national debt is around $37 trillion. And, it's ever-worsening as our federal government continues to borrow another trillion or so each year to continue fueling a life-style we can no longer afford. Some economists, such as Paul Krugman, are calling for expansion of borrowing and spending in order to help jump-start our woefully weak economy. Economists such as him clearly don't understood the concept of stopping digging when standing in a hole from which escape is becoming impossible.

In order to examine the practical implications for our federal debt, consider the current federal tax revenues. Sooner or later individual taxpayers, who pay two-thirds of all such tax revenues, will have to pay back the majority of these debts. It's also worth understanding only about a third of our 315 million citizens pay federal income taxes...including payroll taxes. So, if we divide our current federal debt by the number of taxpayers proportional to their 2/3 share of all taxes paid, it shows each tax payer owing over $91,000 of federal debt. That doesn't include the average federal income and payroll taxes being paid by individual taxpayers this year of around $14,000 each.

To add fuel to the federal debt fire, www.usdebtclock.org shows a projected $124 trillion in "Unfunded liabilities" for promised entitlements for baby boomers. In other words, the recently begun retirement of these 78 million citizens will cost taxpayers $124 trillion more than currently identified revenue sources until the last of them die by around 2050. That comes close to a total future additional tax liability of nearly $700,000 per individual taxpayer.

Also, consider the whining and squealing from some of our political leaders as they deride the horrors of sequestration caused by the start of a mere $1.2 trillion total reduction in spending cuts spread out over the next ten years. Even if sequestration is allowed to play out, our federal debt by the end of the next decade will be around $25.8 trillion instead of the $27 trillion it would be without these minor cuts. Does it look as if our elected from either party are really serious about reducing our untenable expenses in order to actually confront the future financial tragedy rapidly approaching? Can you picture the heads of any family or business with such debt deciding they would reduce spending by such a small amount and keep on borrowing as a way of fixing things? Our government is doing far worse than what so many Americans families are doing by just paying the minimum balance on their credit cards?

The main debate about our national debt we hear from the two parties is focused on a battle between the Democrats wanting to avoid spending cuts by taxing the wealthy, and the Republicans focused on freezing spending instead of raising taxes. Any intelligent person should see neither of these options, alone or combined, will ever actually fix the growing national debt.

Two thirds of our annual spending, over $2.4 trillion, (which is very close to total revenues received) goes to entitlements and interest on debt, which are mandated by law to be paid first. The next big chunk of our spending....most of which is borrowed...is the nearly $700 billion spent annually for military expenses. Pro-military supporters keep saying our nation, with less than 5% of the world's population, and now accounting for 44% of the entire world's military spending, cannot remotely consider making spending reductions! Does any rational person really it's rational to continue spending borrowed money in order to police the entire world?

Usually missing in these debates is the only realistic option for creating jobs and thus increasing national revenues, which is to massively grow our economy. Since our manufacturing ship sailed to lower-cost labor nations long ago, and automation will continue to reduce the need for human labor...and the taxes jobless workers would have paid...how can this be accomplished?

The answer was recently provided in his column by my friend and colleague, LeRoy Goldman. Lee suggested our leaders unite to support every possible action to tap the immense supplies of oil and natural gas under our very feet. Lee also suggests spending a portion of the immense government royalties derived from these natural resources for rebuilding our terribly broken infrastructure.

Frankly, no other option makes any sense by comparison. Why then does our President remain so opposed to opening up drilling and distribution pipe-lines? Do we have any other rational options for creating jobs and expanding our economy?

Oh yeah...I almost forgot...let's just borrow and spend more until America disappears into oblivion as so many former empires have done before!

These are my opinions. What do you think?

Mike Tower