National Debt

After a couple of memorable weeks, where we have seen reality start to set in, and we start to face the bills of enjoying the present without considering the risks and fallout in the future, Bob Vineyard offered a helpful reminder of what’s still looming on the horizon:

If you think $700,000,000,000 is a lot of money to start to bail us out of the mortgage mess.

Or $85,000,000,000 plus another $37,000,000,000 for AIG is disgusting.

Try this on for size.

$85 TRILLION.

That is the estimated unfunded liability for Medicare.

In other words, promised benefits and no money in the bank to pay those bills.

A troubling thought has been bouncing around in the back of my mind.  With the acceleration of the deficit from bailouts announced and expected, plus the drag caused by borrowing to pay back the federal IOU’s  in the Medicare trust fund, and the extra drag coming in a few years when similar action is required for Social Security….

Is it possible that the U.S. is bankrupt, but we haven’t realized it yet?

A headline from Think Progress:

U.S. debt grows too big for National Debt Clock

The national debt (before considering the use of Social Security and Medicare trust funds to offset some of the deficit) has gained another digit, causing the keepers of the debt clock to have to sacrifice a dollar sign to display the current value.

A ThinkProgress commenter made an observation that says it all:

Is there anyone we can borrow some money from to get a bigger clock?

So, are we ready for thrift to become the new black?

There’s an interesting exchange at Donklephant in which Alan Carl takes issue with the tax provisions of Obama’s proposed economic plan:

It’s quite easy for a family of four to make $200,000 a year and sink most of that back into basic expenses with only moderate indulgences. Raising their taxes would force them not to eliminate yachts (they don’t own any) or $1,000 a night rooms during Las Vegas binges (they don’t do that) but to live in a smaller home or, most likely, reduce their personal savings, putting less in their IRAs and education funds and the like so the government can have a bigger piece of the pie. That is not only unfair it’s counter to the very notions of personal responsibility.

The key problem with Obama’s and most other Democrat’s economic plans is that they see the wealthy and even the kinda sorta wealthy as undeserving of their income. [...] They should not be obligated to forfeit a larger share of their income simply because they’ve worked hard and become successful. Payments into Social Security are capped because payments out of Social Security are capped. Unless we’re going to start paying higher earners more in Social Security after they retire, it is profoundly unfair to ask them to bear a greater burden while they are working.

We can debate the appropriateness and effectiveness of higher taxes for the ultra rich, but penalizing families who make $200,000 a year places the aspirational cap extremely low. It actually creates disincentives for people to strive for higher incomes and penalizes hard working Americans who’ve done nothing wrong but make good choices and become successful.

I was about to post a response at Donklephant when I noticed someone had already made the same observation I was about to make, the punchline of which is:

Either you get out of Iraq and cut defense spending, along with reforming Medicare, medicaid, social security, cut aid to Israel, etc.

Or you pay higher taxes, there is no free lunch

I agree with Alan’s assessment—shifting the tax burden is counter-productive, and/or unfair. Unfortunately, the situation the country is, itself, inherently unfair. Any solution will likely be perceived by someone as unfair.

We have a problem in this country—we have a massive amount of debt, and commitments that the country has made to spend more money will only aggravate that problem unless something is done.

Over the long term, “something” needs to include a helluvalot of spending cuts and unwinding of past commitments, so that government’s need for revenue can be kept at a more sustainable level. Making sudden, immediate cuts probably would be rather damaging to the economy right now, and as a practical matter, political and social forces will limit the amount of cuts that can be made.

In the absence of cuts, additional revenue needs to be scrounged up from somewhere. In an ideal world, the country would win some ultra-ultra-powerball, or the folks responsible for the mess would be relieved of funds to pay to return the country to fiscal sanity.

However, the fact of the matter is that we, the voters of America, are responsible for the mess. We haven’t demanded fiscal responsibility from our elected leaders, and we’ve let them get credit-happy while being distracted by bread and circuses.

We need to clean up that mess. That clean-up is going to suck, and it’s going to be perceived as unfair by at least some groups, especially since the clean-up needs to be done in a manner that doesn’t damage the country’s prospects post-cleanup.

That limitation necessarily means that the burden is going to be borne by folks of certain income levels. And the folks who will feel that the worst are those who appear wealthier on their tax returns than reality dictates.

It sucks. It isn’t fair. But the sooner we accept that life isn’t fair, the sooner we’ll be done.

So, remember the national debt?

Remember how a few of us complain about disguising the deficit by allocating the Social Security and Medicare Trust funds to offset it?

MSN Finance has a nice little chart documenting the magnitude of the offset:

So, while it seems that the powers that be have problems in remembering that it’s not good to spend more money than you have, at least they’ve mastered the knack of disguising that tendency.

This bit of happy news comes from the Wall Street Journal (subscriber link):

Adopted 53-42, the revised $9.815 trillion ceiling is intended to give the Treasury enough borrowing authority to manage through the end of Mr. Bush’s presidency and into 2009.

It represents an almost $4 trillion increase from the statutory debt limit when Mr. Bush took office in 2001, and Democrats used the occasion to decry the administration’s fiscal policies even as their leaders felt compelled to back passage.

Am I the only person who thinks that perhaps the feds could learn a lesson or two from the banking world on the perils of overextending credit when borrowers’ long-term ability to pay may be questionable?