I.O.U.S.A - Addison Wiggin [43]
How much of this $ 53 trillion do we have? Nada.
“ By the time today ’ s college graduates are ready to retire forty years from now, ” says David Walker, “ the only things our government will be able to pay for are interest on the federal debt and some of the Social Security, Medicare, and Medicaid benefi ts. All other parts of the federal government will be closed and out of business! ”
As far as taxes go, the United States would have to raise income tax rates across the board by about 2.5 times today ’ s levels to close the fi nancing gap — and some politicians complain when there is any talk of tax increases. Americans are facing a 150 percent increase in federal taxes if they continue down this road. By the year 2048, the United States ’ debt - to -
GDP ratio will be over 400 percent, more than two times the debt levels we hit at the height of World War II. Good luck trying to get any country to lend the United States money then.
No matter which way you slice it, whether you are a Democrat or Republican, the magnitude of this fi scal challenge is much larger than most realize.
For example, let ’ s assume that the Bush tax cuts expire at the end of 2010. That would only solve about 10 percent of the country ’ s federal fi nancial hole. And what about Iraq? Even if the Iraq War ended in 2009, the ultimate estimated cost over time is less than 3 percent of our total fi nancial problem.
America ’ s budget, savings, trade, and leadership defi cits individually are bad enough, but in combination they create c05.indd 84
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Chapter 5 The Leadership Defi cit 85
SOURCE: Compilation from Government Sources/MeasuringWorth.com Figure 5.2 Debt - to - GDP Projection a toxic mix that threatens the country ’ s and each American family ’ s futures.
“ And yet, ” says David, “ there is little talk about making these tough choices today. The longer we wait, the harder the choices become. As the baby boomers begin retiring, this tidal wave of spending is about to reach our shores and we are not prepared for it. And trust me, it could swamp our ship of state.
Unlike many other problems facing our country, this one is ours alone. We can and we must solve this one. The question is: When will we? As our nation ’ s Founding Fathers said, it ’ s really up to us: ‘ We the People. ’ ” (See Figure 5.2 ).
Wake Up, America!
The four defi cits we ’ ve addressed in
I.O.U.S.A. cannot be
ignored.
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86 The
Mission
Americans need to adjust their expectations of what the government can do. And they should only expect it to do what they can pay for it to do. Given the nation ’ s dynamic economy, many countries and individual investors have thus far been willing to fi nance the national debt and enable the nation ’ s personal consumption habit. However, should we continue to run persistent defi cits and continuously pile up debt obligations, this won ’ t last.
The dollar fi gures used when discussing the debt are mind - boggling. As of October 1, 2007, the unfunded liabilities of the U.S. government were calculated by the Government Accountability Offi ce to have reached $ 52.7 trillion. To put that into perspective, the GAO broke it down this way:
• $ 175,000 per person living in the United States
• $ 410,000 per full - time worker
• $ 455,000 per household
By way of comparison, in 2007 the median sales price for a house in the United States — at the height of the real estate boom, mind you — was $ 217,000. Median income during the same period was just under $ 50,000 a year.
The numbers just