“Don’t Steal, the government do not like competition!!” This quotation was seen on The Republican of Texas Ron Paul’s desk from I.O.U.S.A; a documentary directed by Patrick Creadon. The movie was inspired by “Empire of Debt” authored by William Bonner & Addison Wiggin. The quotation suggests that because the US government is using so much of the money they don’t have and passing the check to the next generation, it is the same as stealing. In other words the current generation is splurging on its spending, racking up the national debt and passing the bill to the next generation, thus; stealing from the future generation. Some politicians in the movie referred to this as being wrong and immoral; therefore; something needs to be done today in order to prevent such a horrific impact later down the line. The movie discussed the national deficits in four parts:
- Budget Deficit
- Saving Deficit
- Trading Deficit
- Leadership Deficit (most Serious of the four)
The Budget deficit is the accumulation of all the spending from the beginning which started roughly around the 1700s. Through out history the national deficit have been rising and than paid down like a rollercoaster ride. There was only one time in history when the federal debt was paid down to zero and that was in1835. Since than the deficit have been growing and we are deeper and deeper in debt; for this very reason the Concord Coalition was created to alert the public of the risk of fiscal imbalances. Mr. Boxby is one of the member of this group to fight against this issue. We are currently spending money that we do not have but to make matter worst we are also spending the social security surpluses which have been saved up for future social security payouts. For this reason we are in even more debt. In less than 10 years when the promises to payout to the baby boomer in social security and Medicare the federal deficit will grow exponentially. So the question is…who ultimately suffer for our spending today? Our children do and they will be burden by the increase in taxes and thus will have a lower quality of life.
As a nation we are also lacking in our savings so we are also dealing with a savings deficit. People in general are spending way too much and using the money they do not have, for example using borrowed monies on credits. Our nation is basically addicted to spending and buying things that we can’t afford. Most are even living paycheck to paycheck. The U.S saving rate today is very low compared to the past. On top of the low savings rate, our government is also printing and injecting more money into our slowing economy. The result is a crash in the dollar which is also known as inflation. Inflation is not a good thing and prolong period of high inflation rate can be a recipe for disaster. In general when inflation is high people who suffer the most are those who are less well off; on the other hand when inflation is low everyone benefit. The branch of the government that controls the flow of money is the Federal Reserve. The Federal Reserve have two primary function, determining the money supply and creating monetary policies. The two main policy are stimulating the economy and keeping inflation low; but this is very difficult to do since the two conflict with each other. For example when the Fed decides to stimulate the economy by injecting more money into the system, inflation will rise and vice versa. Our former Federal Reserve Chairman Alan Greenspan (1987-2006) summed it up best when he said, “if fiscal policy is lack and savings is low than there is nothing that the monetary policy or central ban can do.”
Our trade deficit is a result of the nation buying more than we are selling/trading goods and services; Warren Buffet refers to this as “suedo trading.” As of 2007 China ranks 1st with the largest trade surplus of $315.7 billion. Comparing to China where do we stand? Dead last in the amount of $816 billion dollars in trade deficit. As the richest nation in the world we can only sustain our spending habits for so long, eventually all this deficit will backfire and cause our country to fall apart. If we owe too much money to the other nations this will cause political instabilities. As of 2007 we owed Japan $623 billion and China $477 billions. If we owe that much three years ago imagine how much it is today.
Aside from the trade deficit our nation is also lacking in leadership on the issue of our national debt; thus, a leadership deficit. Did you know that our current national deficit is hovering around $12 Trillion dollars and counting? That’s a frightening figure. If you are curious and want to see the actual figures go to http://www.usdebtclock.org/ Our congress is where the fiscal policies are discussed among our leaders. The fiscal policies cover issues surrounding taxes and spending budget. If our leadership is lacking and the problem is not address, then the our debt will grow and will eventually be out of hand. To a point where our children and grandchildren will suffer for our lack of responsibility. Here is an interesting piece of fact; did you know that it took us 42 presidents and 224 years to rack up $1 trillion dollars of debt? What’s even more shocking is that our previous president Bush alone racked up $2 trillion dollars in debt in just 6 short years. This just proves that we are lacking in leadership and neglecting our responsibility to future generations.
The magnitude of our problem is a whole lot bigger than we think; it is bad enough to deal with the budget, saving, trading and leadership deficits individually. But when we combined all of them together it is an extreme toxic mix of a problems. The problem can and must be solve but the question is WHEN??? So how bad is our situation? Currently we have:
- $11 trillion in total debt liabilities promises
- $7 trillion in Social Security unfunded promises
- $26 trillion in Medicare A and B unfunded promises
- $8 trillion in Medicare D (drug benefits)
- $1 trillion in miscellaneous spending
- The Total: $53 trillion dollars in debt
So how much does $53 trillion dollars of debt equates to? Roughly $175,000 of debt per person. With this much debt how will this be handled 40 years from now assuming we don’t do anything to lower the debt? The only thing that our government can do is to service the interest on our debt and some of the programs mentioned above and the rest of the other programs will probably be closed or out of commission. As far as taxes are concerned the government will have to raise fed taxes more than 2 times from today’s level to about 42% by 2040 assuming we continue at our current path of irresponsibly spending. This is what we call compound interesting working against us. If you recall back to our math class, compound interest can work greatly in our favor because it can grow exponentially. The closest example to this is our retirement savings (IRA, 401K, etc.) where the principle earns interest than interest earns on top of interest and so forth. Now picture this on 10 trillion dollars of debt and all of the unfunded promises above. Scary isn’t it? So what can we do to rectify or improve our current current situation? The problem can be solved but it is up to us all!! Here are the solutions:
- Get involved in the “Wake up tour” with David Walker, Mr. Bixby and other leaders.
- Budget solution: demand responsible budget controls both in the white house and our own house
- Demand major reforms in taxes, social security and Medicare programs now because the longer we wait the tougher it is going to get.
- Saving solution: don’t buy things you can’t afford!
- Parents and grandparents needs to open savings accounts for their kids and grandkids since they will need it down the line.
- Trading solution: conserve energy and demand an energy policy that works since huge oil usage mean huge trade deficit.
- Leadership solution: ignore political promises that sound too good to be true because it usually is too good to be true.
- Get rid of Washington “do nothing” plan and those who support it.
- Register and vote.
- Lastly we need our presidents to be a leader and do something about the problem since he have the greatest influence.
To solve the problem we must first be aware of the problem so reading this post is a start. The next step is to go and watch this documentary movies and visit the site at www.iousathemovie.com. Following the suggested solutions above would be the next logical step. Thank you for reading and please let me know what your thoughts are surrounding the issue.
.png)
