Fixing a Bankrupt Federal Government
Our federal government is effectively bankrupt in that it does not have enough revenue to pay its debts. But since investors will still lend our country money, we can keep on borrowing - until we cannot. This problem can be fixed, but we must have the will to do so.
The recent debt ceiling debacle was nothing compared to the real problems, such as a current interest-bearing federal debt of $32 trillion; current total federal obligations of $122 trillion (including unfunded obligations of Social Security and Medicare); a current annualized interest expense of $888 billion (annualized average of last 3 months data); and a CBO projected interest-bearing debt (2033) of $51 trillion (if there are no new spending programs), while the Treasury Department in its annual financial report says, "The current fiscal path is unsustainable."
For now, the government can still borrow money from investors. That will last until investors lose confidence and stop buying federal debt. If that ever happens, the economic chaos that will follow will be unthinkable. It would become a worldwide disaster.
Main Street Economics was founded to alert and alarm the voting public about these problems and to get support from the public to fix our fiscal problems before it is too late. To do so, our government must first recognize the problem that it has grown into areas never contemplated by our Founding Fathers. The Constitution enumerates what the federal government's role was to be and in Amendment 10 to the Constitution, it states: The powers not delegated to the United States by the Constitution, nor prohibited to it by the States, are reserved to the States respectively, or to the people.
Federalism was a vital pillar instituted in our Constitution to separate powers between the national government and the states that formed it. The founders wanted to avoid a concentration of power, knowing from history nothing is more toxic to liberty than unchecked power. Our founders would not recognize the federal government today with its massive spending, taxes and debt, and regulations which encroach on our liberty. This is exactly what the Founding Fathers wanted to avoid.
Now we must develop ideas to fix the problem. It is a mammoth task, beyond the scope of this column, but here are some conceptual ideas to get the country back on track:
Evaluate the role that the federal government should have and jettison many functions that should be with the states or the people.
Follow our prescribed budgetary process.
Address "entitlements" for Social Security, Medicare and Medicaid, which add over $1 trillion to the federal deficit every vear. These must be reformed over time, not by cutting benefits to current beneficiaries, but by future changes to have them become self-sustainable or dramatically reduce their cost.
Reform our welfare and support programs, which contain perverse incentives that encourage dependency, when the original intention was to foster independency. These must be fixed so they help the truly needy or temporarily displaced persons, while requiring able-bodied individuals to work and get off welfare.
Fix our tax system. The 75,000 pages of unintelligible gobbledygook that is our tax code is laden with benefits for special interests and cronyism. Best approach: Start over. Past fixes have just made it worse.
Develop an energy policy that makes economic sense and stop the wasteful approaches that sound good but don't work. We need oil, gas, and nuclear, along with renewable energy that is functional and practical.
Deregulate. There are 188,000 pages in the Code of Federal Regulations. There are thousands more proposed. Many are costly, unnecessary, and hurt our growth.
Our reckless fiscal and monetary policies are driving the Ship of State directly into the proverbial iceberg. We must change course if we are to survive as a country. It is up to us, the citizens, the "voting public" to understand the gravity of the situation and demand our representatives fix these problems. Congress will not fix these problems unless there is public support.
This article was first posted in the September/October 2023 edition of the Tampa Bay Magazine. See our article below.
