When these two agree that there is big trouble brewing, we should all listen.
I have been saying this for years now, and so have many responsible folks in government. Just last week the Chairman of the Federal Reserve, Jerome Powell and the Secretary of the Treasury, Janet Yellen both spoke out on the danger posed by our mounting federal debt. Fixing the fiscal problem is urgent and the problem is very critical. The adults in the room speak! So, what do our professional politicians do? NOTHING.
Why? Because the voters of this country don’t understand the unsustainable fiscal direction of this country. And the politicians will not fix the mess unless there is public support to do so, even though many understand how serious the problem is. But they will not make some difficult decisions that may endanger their reelection.
What I hear from friends is symptomatic of the public’s lack of understanding: “we have been hearing about that problem for decades”, “we never had a problem paying our debt before”. I am not Chicken Little, I am Cassandra: I explain, but no one believes me (see No Spin #136, Cassandra or Chicken Little). And neither my friends, nor the politicians nor the public want to hear why it is different now, so I will explain why the Fed Chairman and the Secretary of the Treasury are almost shouting - fix this country’s debt problem before we fail. Our course is clearly unsustainable.
America’s federal debt is $34+ trillion dollars and growing rapidly. The CBO, Congressional Budget Office, a non-partisan government agency, projects that it will exceed $50 trillion dollars in 10 years and exceed $150 trillion in 30 years, based on present government projections for revenue and expenditures. It assumes the tax reductions in 2017 will expire, (and that is not going to happen) and there are no new programs, there are no recessions, wars, pestilence, pandemics, etc. The underlying assumptions are likely wrong. Our increasing debt will be worse than projected but today no one can project how much worse - if we just keep on our present path, ignoring the warnings.
The Debt to GDP ratio is a critical measure of how big a problem it is. It is now over 120%, the highest it has ever been except during WWII, after which our economy grew rapidly causing this ratio to drop precipitously to the 50% range in the 1950s, easily within a manageable range. BUT, today the projections are for debt/GDP to grow to ridiculous proportions over the next 30 years IF nothing happens to make it worse. If we do not correct our course, it will be over 175% debt to GDP if nothing unforeseen occurs.
THE DEBT IS UNSUSTAINABLE. THIS COUNTRY WILL CEASE TO EXIST AS WE KNOW IT WHEN THE DEBT BOMB EXPLODES. THIS IS REAL - DO NOT IGNORE THEIR WARNING. THEY KNOW WHEREOF THEY SPEAK. AND SO DO MANY OTHERS, LIKE ME, WHO SEE THE ISSUE CLEARLY AND ARE WARNING - FIX THIS MESS BEFORE IT IS TOO LATE.
We fix it with a constitutional amendment to control spending/deficits and our debt to GDP ratio. This requires a public education program to gain understanding of the problem, and the threat it poses for all of us, to build support for the amendment. With understanding and support, the politicians will be willing to make the tough choices required to control spending/deficits and bring the debt/GDP ratio down to sustainable levels.
BOTTOM LINE
Most importantly, take this problem seriously and learn about the issues and what is needed to fix our fiscal problems before it is too late. We owe to future generations to leave them with a country that still works, just as we found it, not one that is bankrupt.
We explain a lot of the details in our book, The Greatest Ponzi Scheme on Earth, which is available for preorder on our website, it will be published March 19. It takes you through the problems in detail, examples of real world economies that work and don’t work, and recommendations to fix our biggest problems.
LEARN ECONOMICS, THEN VOTE SMART