March 18, 2011
America Slouching Towards Fiscal ArmageddonBy Chris Banescu
America is in grave danger. Our government's out-of-control spending and our politicians' refusal to implement meaningful budget reforms are leading us towards a fiscal crisis that can undermine our very way of life. We are spending ourselves into oblivion. With each passing day, we are $5 billion in deficit spending closer to the edge of an abyss that can cripple our economy, destroy America's wealth, and lead to catastrophic social consequences for all current and future generations. Yet our leaders in Washington refuse to face reality and continue to play political games while the country's budget crisis deepens and the threat grows exponentially.
In February of this year the US federal budget deficit grew by a record $224 billion; the biggest one-month increase in history. Worse still, the 2011 US budget deficit is forecast to reach $1.5 Trillion. According to the non-partisan Congressional Budget Office (CBO) this annual deficit represents the largest budget gap in our country's history, equivalent to approximately 10% of America's total economic output. This follows the enormous $1.3 Trillion deficit racked up for 2010 and will be superseded by an equally disturbing $1.65 Trillion deficit forecast for 2012.
In just three short years, Obama and the Democrats have racked up a whopping $4.5 Trillion in debt. That is more than double the $2.1 Trillion in debt added during the entire eight years of the Bush administration. It's an astronomical increase in deficit spending of roughly 571%; that's nearly six (6) times faster than previous administrations.
With Congress unwilling to address the runaway spending, roughly half the money the federal government now spends it has to borrow. Approximately 40 cents out of every dollar in spending is financed by mortgaging our future to foreign investors, primarily China. For 2012, the deficit spending will increase to 45 cents per dollar. Each day America will add another $4.5 billion to the $14.3 Trillion total National Debt. Sometime between now and 2012 the US debt will equal the country's Gross Domestic Product (GDP), the total market value of all the goods and services in our economy for an entire year.
This year the US will spend $200 billion in interest payments on the debt. Thanks to historically low interest rates this figure is lower than normal. Once interest rates start to rise -- and rise they will as inflation is quickly spreading throughout our economy and the world -- we will face an extra $100 billion in interest payments per year for every one (1) percent increase in interest rates. The Wall Street Journal predicts that without any changes, the interest on the nation's debt will reach $900 billion annually in another 10 years. According to their forecast, those yearly interest payments will be 17% greater than our annual Medicare costs and 82% larger than "the cost of all non-security discretionary spending programs combined."
The $1.65 Trillion deficit for 2012 will make the debt grow to 105% of the nation's GDP, a perilous milestone. If the structural budget gaps are not effectively dealt with, the CBO predicts that an additional $7.1 Trillion in debt will be racked up in the next 10 years, increasing our total National Debt to $21.4 Trillion by 2021. But it gets worse. The current unfunded liabilities total (social programs like Medicare, Medicaid, and Social Security which the US government has promised to pay to its citizens) is rapidly approaching $113 Trillion, about $1 million per taxpayer. That will grow to a disastrous $144 Trillion by 2015 if nothing changes.
Last month, members of the National Association for Business Economics provided yet another ominous warning. These economists identified the US budget deficit as the "gravest threat facing the economy, topping high unemployment and the risk of inflation or deflation."
We are on an unsustainable path of uncontrolled and wasteful spending that can devastate the United States. And what is Congress actually doing to effectively deal with this looming catastrophe?
The delusional Democrats have proposed a microscopic $4.7 billion cut for the 2012 budget. That's a ridiculous 0.1% of the total budget for 2012. It represents exactly 25 hours of spending by the government. Multiply that by 100 and it still falls short of the proverbial drop in the bucket. Clearly Democrats are not interested in helping this country avoid fiscal calamity. They're more concerned with demonizing conservatives and maintaining power, instead of governing responsibility and rationally for the welfare and safety of all Americans.
President Obama's phony budget, submitted last month, insanely claims about $1.1 Trillion in "cuts" over the next decade. These fictional cuts happen courtesy of an additional $2 Trillion in new taxes proposed by his administration over that same period. Even taking Obama's fraudulent budget proposal seriously, the US debt will still grow from $7.2 Trillion to as high $9 Trillion over 10 years. This is worse than doing nothing.
The supposedly fiscally conservative Republicans in the House originally proposed a small $100 billion cut in spending. That amount was subsequently reduced during House negotiations to a measly $61 billion, representing just 1.6% of the $3.73 Trillion budget for 2012. Even that minor reduction was mischaracterized as "draconian" and soundly rejected by the Democrats in control of the Senate. Obama has twice threatened to veto the measure if it passed the Senate by some miracle. There is little hope for mature engagement and sane debates with the current majority of leftists in power. They are not interested in cutting spending or negotiating reasonably to implement authentic budget reductions.
A devastating debt crisis is coming; simple mathematics predict it. It is no longer a matter of if, but when. The time for hysterics, hyperbole, and finger-pointing is over. The time for political games, grand-standing, and partisan shenanigans is long past. This is no longer about Democrat, Republican, liberal, conservative, or progressive issues. This affects all of us. The looming danger crosses all party and ideological lines and jeopardizes all Americans, present and future generations. We're staring down a massive debt tsunami that threatens the US with a fiscal Armageddon the likes of which we've never seen.
Since Democrats and the White House are obviously unwilling to face reality and completely AWOL on this crisis, here's a call to action to the conservatives and the Tea Party lawmakers in Washington, our only remaining hope.
Republicans, it's all hands on deck. Convince weak-kneed and waffling colleagues to find their backbone and stand firm. Since you're going to be demonized and vilified anyway, regardless of what you do, make a stand and demand meaningful reductions in government spending. Ask for at least $500 billion in budget cuts, slowly negotiate down to a more comprehensive $400 billion number, and only settle for a final compromise of $370 billion in cuts (still just 10% of the 2012 budget, but better than the original 1.6%). Stop worrying about "bi-partisanship", "reaching across the aisle", and all that other nonsense. It's evident that most Democrats and Obama are not interested in any of it. To them it's all about consolidating and maintaining their own power at all costs, damn the consequences. They would rather shove the country into bankruptcy and fiscal collapse than act responsibly and sensibly. Didn't the ObamaCare battles and the last few decades of disastrous compromises with liberals and progressives teach you anything?
Conservatives, act like leaders and worthy stewards of this great nation. Trust that God will be with you if you remain faithful to Him, speak truthfully, and act honorably. Be true public servants and courageous representatives of the people who elected you. Demand real action and sweeping reforms. Do not back down and compromise just to get along. It doesn't work! Be ready to shut down the government if you have to. Force Congress to do its job to protect the lives, freedoms, and interests of all American citizens, not just the unions, the lobbyists, and other political operatives and supporters. Show the rest of country that you're willing to do the heavy lifting and take the hits. Make the hard choices and stand behind your principles. That is real leadership!
Republicans, in November 2010 we elected you to represent our voices and bring the right kind of hope and change America desperately needs. We're counting on you now to act decisively! Don't disappoint us, the clock is quickly counting down to the fiscal catastrophe awaiting all of us. We're almost out of time.
Chris Banescu is an attorney, entrepreneur, and university professor. He regularly blogs at www.chrisbanescu.com.