Thursday, September 6, 2012
$16 trillion. This past week, the U.S. national debt passed $16 trillion. A number of that magnitude boggles the mind and it is hard to really get a grasp of what that means. Fear not, friends. The View is here to help put this number in perspective. At $16 trillion, our debt is now greater than the total value of the U.S. Gross Domestic Product (GDP), or the goods and services that our country produces. Our current GDP is $14.8 trillion. The significance of that fact is simply this: we could tax 100% of our nation's income of production or national income and still not erase our deficit. The debt per taxpayer is an astounding $111,414 and growing. Every child that is born in 2012 is saddled with $50,000 in debt. Keep in mind that interest rates are near zero, and when they start to rise- and they will- the interest that we will be paying on our national debt will be more than the entire budget for the Department of Defense. The size of our debt is problematic, but the fundamental problem that we face in our country is that Washington has no control over their spending habits. Don't believe me? Since Obama took office, our national debt has ballooned from $10.6 trillion to $16 trillion. Congress has raised the debt ceiling 13 times since 2001, characteristic of their inability to exact fiscal discipline. Furthermore, our annual deficits- what the federal government spends relative to what it collects in taxes- now tops $1 trillion. These numbers point out that we cannot tax our way out of these problems. We must, as a nation, begin to take serious steps to rein in spending and impose fiscal discipline. Until that happens, our country is traveling the same road as Greece.
I saw a flying saucer today. It appeared right after the flying cup my wife threw at me.
How did we get in this fiscal mess? There are a number of reasons, but I believe that it has roots in the arrogance of power. Our federal lackeys, both elected officials and bureaucrats, believe that government knows best what is right for the market, for business, and for the individual. Washington believes it knows better what works in Nashville than those who are in Nashville. Government has insinuated itself into all facets of our life, and has attempted to control our life in a way that has been unprecedented. Want proof? Dodd/Frank, legislation that was passed to regulate business and banking, was 849 pages and created over 1,000 new laws and regulations. Obamacare, the socialized medical program that was rammed through Congress, is over 13,000 pages and implements a myriad of rules and taxes, many of which we are still discovering (remember then Speaker Nancy Pelosi infamously stating that 'We have to pass this bill to find out what is in it."). Our federal tax code is 73,608 pages and the federal register that clarifies some of the tax rules is 82,419 pages. By contrast, our Constitution is 6 pages. Our Founding Fathers knew that the government that governed least governed best. That ethic has been lost as Washington has usurped power and control over most of the aspects of our daily life. The result of this overreaching is a fiscal mess of unprecedented proportions. We have a choice as an electorate: we can continue the present course that our government is taking and we will spend ourselves into oblivion. Or we can take control of our government once again and force our leaders to live within their means and limit their power.
My wife and I have religious differences. She refuses to worship me.
Generally accepted accounting principles require businesses to account for future liabilities. Future liabilities are monies that are owed but are not due in the current tax or calendar year. Build a new plant and finance the construction over several years, and the future liabilities are what is owed or due in more than a year. Our government has future liabilities as well. If you are paying into Social Security, you expect to get that money back when you become eligible to receive payments from the SS trust fund. That is a future liability of our government. Lost in all the talk of our current deficit is the fact that our government has some massive future liabilities. Money is owed to future social security recipients and promised under other entitlement programs. How much? Estimates range from $120-200 TRILLION. Lawrence Kotlikoff of Boston University estimates $220 trillion dollars. These unfunded liabilities are going to completely swamp the government. What is going to happen? Taxes will most assuredly go up, but as we have seen, taxation alone will not solve the problem. Future beneficiaries will, I believe, face significant means tests before they receive benefits. That simply means that if you have saved and done what is prudent, you will not receive the full benefit that you are due. Your benefits will be cut. By now, I am sure you see the absurdity of where these programs have devolved. Be prudent financially, save your money, and you are going to pay a penalty through reduced payments. Be profligate, don't prepare financially, and you will be rewarded with full benefits. Now I ask you, do you think Washington should be as involved in as much of of personal and business life as it currently is? I think this example should answer that question for you.
The most terrifying thing my wife says to me is, "Notice anything different?"
And that, my friends, is my view.