America Is Running Out of Time (Vol. 210)
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Updated: 2 hours ago
The numbers mathematical, not political. Unless Americans demand fiscal responsibility our children and grandchildren will inherit a nation burdened by debt and facing an avoidable financial crisis I have spent my entire career working with numbers.
I was a CPA with a national accounting firm for more than seven years. I served as a corporate controller.
For the past 52 years, I have been a commercial real estate developer. Reading financial statements isn’t a hobby for me. It’s what I’ve done my entire professional life.
Seven years ago, I founded Main Street Economics as an educational nonprofit. What began as a hobby has become something much more. It has become a crusade – an obsession to fix this mess before it is too late.
Why?
Because over those seven years, I have watched the financial condition of the United States deteriorate at an alarming pace. Every year the numbers become worse. Every year the political excuses become more creative. Every year the solutions become more difficult.
I have reached the unavoidable conclusion of if we continue on our current path, we are heading toward a fiscal crisis – bankruptcy. It will be unlike anything our country has experienced.
I refuse to sit quietly while my generation leaves America financially broken for our children and grandchildren. That would be unconscionable.
We inherited a country that worked remarkably well. Through decades of reckless borrowing and chronic overspending, we are handing our children and grandchildren a nation that is financially dysfunctional and speeding toward a fiscal cliff.
No one knows exactly when the day of reckoning will arrive.
But history tells us that it always does; no nation in the past has escaped and the chief cause is always financial.
So how did we get here?
In my view, the answer is straightforward.
We are governed largely by professional politicians rather than statesmen. Their priority is winning the next election to continue their professional career. They have learned that voters like government benefits but dislike paying taxes, so they do what they must to be re-elected. And we voters respond by electing them.
The political solution has been the simple formula of providing the benefits today and send the bill to future generations.
Most Americans never see the bill.
They don’t read the government’s financial statements. They don’t follow the projections produced by the Congressional Budget Office. They understandably focus on paying their mortgage, raising their families, and making ends meet.
When some members of Congress attempt to address the problem, the demagogues attack with vengeance, political slogans instead of serious debate. ‘They are throwing grandma over the cliff’. Responsible budgeting is portrayed as heartless, and difficult conversations are replaced by nonsensical talking points.
The result is predictable.
Washington continues borrowing.
The debt continues growing.
The burden continues shifting to future generations – we are mortgaging their future.
For many years, annual deficits were measured in hundreds of billions of dollars. Today, they are measured in trillions.
The Treasury publishes the numbers every year. It says clearly the path we are on is unsustainable. The Congressional Budget Office publishes long-term projections. None of this is hidden. I read them and shudder.
Today’s picture is deeply troubling.
Interest-bearing federal debt has surpassed $39 trillion and is projected to grow by roughly $2 to $3 trillion annually. Current projections suggest it could approach $70 trillion within the next decade. Meanwhile, unfunded obligations for Social Security and Medicare total approximately $76 trillion – these are promises we have made but have on means to pay.
Annual interest costs have climbed above $1.1 trillion and continue rising rapidly.
The outlook for America’s major entitlement programs is equally concerning. Under current law, when the Social Security and Medicare trust funds become depleted in 6 and 7 years, respectfully, benefits would automatically be reduced unless Congress acts. Current projections indicate reductions of approximately 22 percent for Social Security and 11 percent for Medicare.
Do you get the picture yet? These aren’t political talking points.
These are mathematical realities.
We are running out of time.
It isn’t just Main Street Economic speaking out, many informed people are, but the ‘voting public’ isn’t hearing these cries in the wilderness.
This week, Michael Bloomberg issued a powerful warning in a Bloomberg Opinion essay titled “Governments Must Fix Their Debt Messes Now.” Bloomberg argues that advanced economies, particularly the United States, have accumulated so much debt that the next financial crisis could be fundamentally different from 2008. His concern is simple but profound: governments rescued the financial system during the last crisis. If governments themselves become overextended, who will rescue them next time?
The United States is not to big to fail, it is too big to save!
Bloomberg concludes that restoring fiscal discipline will require political courage, spending restraint, and difficult bipartisan compromises.
Whether one agrees with every recommendation or not, his central message reinforces what Main Street Economics has been saying for years: debt matters, and delaying action only makes the eventual solution more painful – until there is no solution.
You can read Bloomberg’s essay here:
History offers a sobering lesson. No great nation has ever survived forever. A primary cause of failure has always been financial. Will that also be the fate of the United States – we are not immune to economic reality?
We have already consumed most of our fiscal flexibility. We must borrow this year $10 trillion simply to refinance existing obligations and pay for our deficit. If investors ever lose confidence in America’s ability to manage its finances responsibly, borrowing costs could rise sharply, creating a vicious ‘doom loop’ that becomes increasingly difficult to reverse and eventually ends in bankruptcy.
That is why I co-authored The Greatest Ponzi Scheme on Earth with economist Dan Mitchell. We wanted to explain, in plain English, how we reached this point and why ignoring the problem is not a viable strategy.
So what should we do?
The answer: Education.
Congress will not solve this problem unless the American people demand it.
Citizens must understand the numbers, appreciate the long-term consequences of inaction, and insist that elected officials make difficult but necessary decisions. Those decisions will undoubtedly involve trade-offs. There will be short-term sacrifices.
But they will pale in comparison to the consequences of an American bankruptcy.
Bottom Line
Ask yourself one question.
Are you comfortable leaving your children and grandchildren a country that is essentially bankrupt, headed to failure?
If your answer is yes, then just continue to pretend nothing is wrong. Problem? What Problem?
If your answer is no, then now is the time to act.
Demand fiscal responsibility.
Demand honest leadership.
Demand that Washington stop mortgaging our children’s future. Let them know that if they refuse, you will vote for someone who will.
That will get their attention.
The numbers are tell the story.
The question is whether we are willing to listen and act before the final curtain falls on America.