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By Marshall Connolly, Catholic Online (NEWS CONSORTIUM)

10/30/2013 (11 months ago)

Catholic Online (www.catholic.org)

Liability could be higher when you consider not all adults pay taxes.

The federal debts is now so large that each American taxpayer owes 1.1 million in debt. Also, it gets worse. Much worse.

It will never be repaid.

It will never be repaid.

Highlights

By Marshall Connolly, Catholic Online (NEWS CONSORTIUM)

Catholic Online (www.catholic.org)

10/30/2013 (11 months ago)

Published in Politics & Policy

Keywords: National debt, liability, 1.1 million, solutions, problem, balanced-budget, repudiate, bankruptcy


LOS ANGELES, CA (Catholic Online) - You now owe more towards the federal debt than you will probably earn over the rest of your lifetime. Your individual liability is now 1.1 million dollars.

That's $1,100,000 for every adult citizen in the U.S.

It gets worse. When you consider that about half of adult Americans actually pay anything in taxes, you realize that your liability is probably much closer to 2.2 million than the reported 1.1.

The national debt has just passed the $17 trillion mark with $7 trillion coming during the Obama administration's tenure. Add the "Affordable" Care Act to the mix and we're looking at trillions more because many Americans will enter the Medicaid system, Medicare patients are being dropped, and government subsidies are making up the difference.

It is time to recognize that our country is broken. We are broken in many ways (spiritually, morally, socially), but within the scope of this article, we are broken financially, and this will have a profound impact on our future. The credit of America is far from AAA.

Our government spends a little over ten billion dollars per day according to statistics reported by the Tax Policy Center. However, our receipts only cover about two-thirds of that amount. Future projections by the Center suggest better times ahead, but we will continue spending more than we take in for the foreseeable future.

Any disruption to our economy, a terrorist attack, a war, a financial collapse, or even a good recession can sink the economy further, making those dreamy, low deficit numbers turn into bigger nightmares.

Someday, the United States of America will be so far in debt that we will no longer be able to repay it, ever. Our creditors know this, but for now, they believe the U.S. will do anything to repay them. Only when they feel we're at the end of our financial rope, will they start cutting us off, then the pain starts.

There are only two possibilities for the country. One is to dramatically cut spending, by at least a third. Not over 10 years either, but immediately. Much of this would come from the military, but some would have to come from social welfare programs and various government schemes.

The most important thing is for the government to cut its corporate welfare policies out. Specifically, the government pays out much of its $10 billion dollars per day to contractors who bill the government premium rates for goods and services. Healthcare is also a major expense. Unless the government learns how to say no to high prices, we're doomed.

Of course, the ramifications of these policies is economic decline. A reduced military will reduce U.S. hegemony. That means less favorable trade in the long-run. The dollar could lose its status as the world's reserve currency. Cuts at home would reduce spending stimulus. Welfare money is expensive, but it sure stimulates the economy, because these recipients spend all of it-they can't afford not to.

The cuts in big-time payouts to government contractors would also be pretty painful. Quality would drop, unemployment would increase, but we would have fewer millionaires living in belts around the D.C. area where a surprising concentration of government contractors now reside. These people would have to enter the more competitive, private market to maintain their fortunes. It would be harder for them, but increased privatization of some government services would give them a new niche while reducing costs. Naturally, we don't want to bankrupt these citizens who also pay the most taxes, but we also don't want them suckling upon Washington either. They consume much more than they pay. Yes, they're going to hate this-vehemently. Do we really have a choice?

The impact to medical care would also be unknown, but cutting back on this expense in the form of smaller payouts, possibly even price controls, would lead to shortages. There would also be much less innovation in healthcare coming out of the United States, although current innovation is of questionable value when every new drug sells for a price that can bankrupt a family within weeks.

So such cuts would be painful, they would provoke an immediate recession, but are the only way to wrangle the economy back under control. Future administrations would have to keep up the discipline, possibly through a balanced-budget amendment.

If the first solution is a crash-diet, then the second is liposuction. The United States could, theoretically, repudiate its debt. In other words, the nation would declare bankruptcy and stick debt holders with the loss. The country would wipe its debt-slate clean and start again at zero.

Of course, even if this were truly possible, we would have to start over on a diet, because our credit would be ruined-no more easy money to fund government, and we would never again be able to afford massive expenditures because the funding would not be there. A balanced-budget would be forced on the nation because nobody would loan us money, at least not for a long time.

In actuality, the most likely result is the second one, in another generation or so. There's no way to tell what the future really holds. For now, we seem to be hoping that the next generation discovers some breakthrough that will bring surpluses back to our economy, just as the development of the internet did in the 1990s.

However, the likelihood of that is quite small.

No child should be born with a debt against their name, especially a debt that for them produces no return. Our massive fiscal irresponsibility is a product of our broken political system, the malignant spread of liberal spending policies, ironically perpetuated by Republicans and Democrats quite alike, and the doting of our leadership on both corporate and individual welfare recipients. If you are poor, you love the government. If you are rich, you have reason to love the government too, the rest of us, not so much.

Our house of cards will collapse one day. We had best decide now how to manage it, because it will happen. The sooner we start, the easier it will be on everybody, and our troubled republic.


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