Barbara Lawrence, a Tennessean who was recently interviewed by WDF News in Chattanooga on the subject of healthcare reform, said: "They say we're the richest nation in the world, why can't we have health care for everybody.”
These days similar claims are being increasingly made by those who think that “the richest country” should provide all its citizens with healthcare. This way of thinking is encouraged by populist politicians like Senator Chris Dodd of Connecticut who recently declared that “in the richest country in the world, you shouldn't have to be well-off to get well.” He then promised a healthcare bill that would “assure affordable, high-quality healthcare for every American."
There is, however, one problem with this promise. Our government cannot afford to underwrite yet another expensive program. The reason for this is simple: After decades of fiscal excesses, the government of “the richest country” is basically broke.
If this comes as a surprise, consider the following. Our national debt currently stands at $11.5 trillion, twice the total yearly output of the world's second largest economy (Japan). To pay it off would take fiscal discipline which would require that over a period of years our government spend less than what it takes in. But this is hardly realistic, since we have ran deficits in forty-four of the last fifty years. Decreases in spending are practically unheard of in this era of limitless governmental compassion. Even proposals for miniscule reductions in the federal budget are met with outrage and condemnation. Those who dare to suggest such a thing are promptly cast as cruel and un-compassionate halfwits who want to starve, rip off, or otherwise hurt the American people.
It is unfortunate that as we strain under record debt we are being led by the most fiscally irresponsible administration in American history. This year they will run up a deficit of more than $2 trillion, which is five times the previous record of $454 billion set by Bush in 2008. It is no surprise, then, that the Congressional Budget Office (CBO) projects a rapid growth of the national debt in the years ahead. In its June 2009 report, the CBO projected that the debt held by the public will jump from 40 percent of GDP in 2008 to over 60 percent of GDP in 2010. In other words, there will be an increase of 50 percent in the first two years of the Obama administration. High as these projections are, they do not factor in the cost of healthcare and other costly programs the president is seeking to implement.
Enormous as the national debt is, it only constitutes a small fraction of our government's indebtedness. Due to America's aging baby boomers and other demographic trends, the “big three” entitlement programs – Medicare, Medicaid, and Social Security – put the federal government in the red by at least another $50 trillion. Taken together the government's total obligations of more than $60 trillion are roughly the same as the world's annual combined GDP.
In light of this, more and more observers are coming to the conclusion that it is simply impossible for the federal government to live up to its fiscal obligations. One of them is Peter Schiff, one of this country's foremost financial experts and one of the few who accurately forecast the bursting of the housing bubble. In a speech he gave at the Ludwig von Mises Institute earlier this year, Schiff showed that we are in no position to make good on our liabilities. Speaking about the number one holder of our public debt, Schiff said that “we're not going to pay the Chinese back their money. It's impossible. We can't. We can't possibly.” Considering the enormous numbers involved, one gets the sinking feeling that Schiff is right once again.
But rather than taking proper emergency measures our political elites seek to conceal the depth of our predicament. Perhaps their most dishonest trick was to remove entitlements from the nation's balance sheet. They did this by claiming that these programs do not represent a genuine liability, because they theoretically can be recalibrated through the legislative process. This, however, is a virtual impossibility in our political culture. Entitlements are considered the third rail of American politics and for a good reason – anyone who attempts serious reform is almost invariably destroyed. In any case, by concealing the true extent of our fiscal plight, the government is doing a great disservice to the American people. It has been remarked that when private corporations are caught conducting their book-keeping in such dishonest fashion their management is sent to jail.
Far from addressing the crisis, we have an administration that is adding to our debt burden with an abandon unparalleled in this nation's history. Barack Obama publicly declares that the huge deficits that he has run up “keep him awake at night,” and yet he wants to implement a high-ticket healthcare program whose cost would eventually exceed that of the most expensive entitlement. This would break the bank, if the bank were not broke already.
The only reason for why our finances have not yet collapsed is because our government can still finance its deficits by borrowing at relatively low interest rates. But the era of low bond yields is coming to an end as governments and investors across the world are increasingly voicing concerns about America's deepening indebtedness. They are slowly coming to realize the unthinkable – America will not be able to make good on its debts. Things have gotten so bad that last Wednesday even the liberal Los Angeles Times felt compelled to sound the alarm:
In March, Chinese Prime Minister Wen Jiabao publicly questioned the safety of U.S. Treasury debt. Over the winter, prices in credit-default swap markets implied a significant probability of default on U.S. debt in the next five years. Default on national debt is what happens in failed states and banana republics; such a possibility for the U.S. would have been unthinkable in the past.
Those who may think this an exaggeration, need to go no further than the government's own Congressional Budget Office which opened its latest report with a sobering statement: “Under current law the federal budget is on an unsustainable path.”
The path we are treading is indeed unsustainable, but what makes our situation truly bleak is that there no political will to change the course. The answer of this administration to the crisis is to spend even more. As we are hurtling toward a fiscal abyss, Obama's approach is to press down the accelerator.