At the cost of more than $800 billion, the just -passed stimulus bill stands as the largest single outlay item in history. So great is the amount involved that it exceeds the GDP of even such economies as Australia, Saudi Arabia and Argentina.
Needless to say, the federal government does not have the cash to finance its latest undertaking. Much of it will have to be borrowed, and that amount will be added to the budget deficit, which, many now believe, will top one trillion dollars.
The deficit will be then appended to the national debt, which currently stands at $10.7 trillion. Nearly than 70 percent of our GDP, this astounding amount grows by $2.3 billion every day. To put it in comprehensible terms, every single American family would have to pay $160,000 in taxes in order to erase that amount.
But this is not the full story. The $10.6 trillion is only a fraction of the real national debt, which, in reality, is roughly six times higher. The difference between the official figure and the government’s true obligations is made up of entitlements, primarily Medicaid and Social Security. By pledging to cover the costs associated with these programs, the U.S. government is now beholden to the tune of $50 trillion.
This pushes its overall obligations to the stratospheric neighborhood of $60 trillion. To put it into prospective, this figure is roughly four times our national GDP and larger than the GDP of the entire world in the year 2007. A debt the like of which the world has never seen, to pay it off every American household would have to fork over on average $516,000. Yes, you are reading correctly: Every American family is now on the hook for over half a million dollars, and counting.
There are, however, some experts who estimate that the actual figure is larger still. One of them is Richard W. Fisher, the head of the Federal Reserve Bank of Dallas, who said in a speech before the Commonwealth Club of California:
Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent.
Since our spending-addicted representatives do not want us to know the full extent of America’s indebtedness, they have come with an ingenious way of taking entitlements off the nation’s balance sheet. Entitlements, they claim, are not genuine accounting liabilities, because they can be cut or reduced if the need should arise.
This is a rather clever argument to be sure, but there is one problem with it. Almost everyone knows that for all practical purposes entitlements can never be cut. For this to happen a willing president and a willing Congress would be required, a combination that is very unlikely to occur. Considered a minefield of American politics, most politicians steer well clear of the subject of entitlement reform. Those few brave ones who have attempted to place the crash-bound train on a sounder track have been invariably savaged. You may still remember what happened to George W. Bush who after his re-election sought to use his “political capital” to reform Social Security.
Unwilling to address the problem, those entrusted with our national finances are using accounting gimmicks to keep Americans in the dark about the state of the country’s financial condition. By underreporting the extent of the government’s fiscal obligations, they are seeking to prolong for as long as possible their unsustainable spending spree. There are many who fear that we may be past the point of no return in terms of our ability to make good on our commitments. In other words, we may be heading for national bankruptcy.
A few years ago, Senator Edward Kennedy was reported as saying to younger members of his family, “I'm glad I'm not going to be around when you guys are my age.” When they asked him why, he replied, “Because when you guys are my age, the whole thing is going to fall apart.” There can be little doubt that Senator Kennedy had the country’s dire fiscal condition in mind when uttering those haunting words. Although a proponent of big spending all his life, Kennedy seems to realize that sooner or later the hour of reckoning must come.
Regulations require that corporations as well as state and local governments record expenses immediately after a transaction takes place, even if the payment will be made in the future. The federal government, however, refuses to play by this rule. Instead it looks for ways to keep its astronomic obligations off the nation’s balance sheet.
Rather than wisely administering America’s finances, our representatives are about to add hundreds of billions of dollars to the already crushing national debt. Reckless and irresponsible, they are taking this nation down the road to a fiscal Gomorrah.