Barack Obama and his Congressional majority are accumulating trillions of dollars of unfunded liabilities for America. The President’s political agenda is pushing United States debt to a level that will soon exceed the value of the nation’s annual economic output. As of June 4, 2010, the national debt (i.e., the sum of all outstanding IOU’s issued by the U.S. Treasury) reached $13 trillion. That’s 88 percent of the gross domestic product (GDP) projected for 2010. By current estimates, the debt will reach 100 percent of GDP by 2012. Looking a bit farther into the future, President Obama’s projected budgets are poised to add $8.5 trillion (about $74,000 per U.S. household) in new government debt by 2020. That fiscal irresponsibility coupled with the unsustainable costs of Social Security, Medicare, and Medicaid is on the verge of detonating a debt bomb. Without something like a roadmap for America’s future, the federal government will continue to careen toward astronomical debt, crushing taxes, and sluggish economic growth. Would you like to know more?
There a two components of national debt. Public debt is owed to individuals, corporations, the Federal Reserve, and local, state, and foreign governments (China is a major creditor). These individuals and entities purchase bonds and Treasury securities, thus providing the U.S. government with money to cover annual federal budget deficits. Debt held by the public is currently about $8.6 trillion of the$13 trillion total. The U.S. spends more than $30 billion dollars every month to pay interest on the current amount of public debt. That’s about 75 percent of the monthly budget for the Department of Homeland Security.
Government debt is the second part of the national debt. It is money drawn from the Social Security trust fund and other government accounts. So it’s really just an accounting mechanism to avoid paying interest on borrowed money. But when the time comes for repayment, government debt will almost certainly be converted into public debt by selling more treasury bills. With unsustainable systems like Social Security, Medicare, and Medicaid running aground in insolvency, debt held by the public is set to soar. Subsequently, the additional interest payments by the Treasury will cause the national debt to skyrocket.
The financial future of America looks grim. Based on projections, spending on Social Security, Medicare, and Medicaid will double by 2050. Stated in different terms, the annual monetary consumption of these three entitlement programs alone will grow to an amount that nearly equals 20 percent of the anticipated GDP. Yet, in the face of such foreboding circumstances, George Bush initiated the $700 billion Troubled Asset Relief Program (TARP) and Barack Obama passed the $816 billion American Recovery and Reinvestment Act (a.k.a., the “stimulus”). And now the monstrosity of Obamacare is looming with another $1 trillion to $2 trillion of red ink!
One concrete alternative to reverse course is the Roadmap for America’s Future proposed by Representative Paul Ryan (Republican – Wisconsin). A goal of this plan is to remove ownership of healthcare coverage from government and employers and shift it to individuals. Another facet involves securing Medicare for current beneficiaries while utilizing medical savings accounts for future beneficiaries. An idea to shore up Social Security gives individuals the opportunity to invest part of their Social Security taxes in personal retirement accounts, assets which can be passed on to their heirs. The road map also strives to implement pro-growth tax reforms. Of course big government socialists profess such strategies are fraught with unacceptable risks and reductions in benefits. Well, we certainly see the peril associated with unbridled entitlements. The current political road is an expressway to U.S. bankruptcy.
America’s debt bomb must be defused. While both parties share the blame for our national predicament, it’s clear that liberal Democrats will never halt the destructive policy of unfunded spending. That means sweeping changes are in order for November 2010. Voting citizens will have the opportunity to send conservative leaders to Washington, D.C., individuals who adhere to Constitutional principles and fiscal responsibility. Here’s the first mission for our new debt bomb squad; strip the credit card from Mr. Obama’s grasp.