Debt Draws Attention
By Terry Savage
TheStreet.com Contributor
8/27/2006 9:47 AM EDT
Is the U.S. bankrupt?
In a study published earlier this month, economist Lawrence Kotlikoff pointed out that the U.S. is responsible for $80 trillion in future entitlement promises -- a figure about six times larger than the U.S. economy. To make good on those promises, future workers would have to pay tax rates ranging from 55% to 80% of their incomes!
The same week that Kotlikoff's study ran in the Federal Reserve Bank of St. Louis bulletin, the comptroller general of the U.S. said, "Current fiscal policy is not sustainable, and hard choices must be made ... we're mortgaging the future of our children and grandchildren and creating a shameful legacy."
Finally, some knowledgeable and authoritative people are starting to bring this national crisis to the attention of the public.
Fiscal Wake-Up Tour
The comptroller general, David Walker, is on a national "Fiscal Responsibility Wake-Up Tour" -- a nonpartisan effort to educate the public to the crisis that looms, not only in the next few years, but as baby boomers retire.
Walker, who is in the midst of a 15-year term, is being supported by both political liberals and conservatives in his efforts to shine a light on the budget problems that are approaching. Here are some of the facts that he pointed out in a presentation last week:
About 60% of our federal spending is now mandatory, primarily because of Medicare and Social Security obligations and interest on the national debt.
While the 2005 budget deficit was widely reported at $318 billion, if it is calculated on an operating basis like one that most companies use, the year's deficit was easily double that amount.
We finance our deficits by borrowing -- and 50% of our public debt is currently owned by foreigners.
Interest on the national debt is expected to be about $200 billion this year -- around the same amount that we spend on Medicare.
We currently have a $46 trillion liability for Medicare and Social Security obligations -- and the new drug bill will easily add another $8 trillion in promises.
Over the next 25 years, Medicare spending will grow at nearly five times the rate of GDP growth.
Every newborn arrives with an immediate debt of $156,000 -- which constitutes fiscal child abuse!
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