Kick that Can Again
Citing the $14.3T federal debt ignores real problem. What we should be worried about is the present value of all future expenses, minus all future taxes. This encompassing figure uses the same math that pension funds use to ensure solvency and is referred to as the 'fiscal gap' by the CBO; simply, it is all the promises made under existing law less all future tax revenue. And what is this number? Boston University's Laurence Kotlikoff estimates that the fiscal gap is a mind blowing $202T which makes the gap is more like a chasm.
Because we hear the term trillion so often, it may help to break the figure down in to a more manageable number. To cover a fiscal gap of $202,000,000,000,000, every one of the 139M working Americans would have to write a check to the government for $1,453,000. If that sounds like a lot, it is. In fact, the total value of all the wealth in the country is only $54T, so if you gathered up everyone's 401k, home equity, checking accounts, CDs, stocks, treasuries, gold, etcetera you would still only cover 26% of the gap. Obviously this situation causes another problem; if you take all the wealth, everybody is left with nothing.
The rating agencies aren't warning of a downgrade because of an extra $2.1T of debt, they are considering a downgrade because they fear that the sum of future promises made by Washington can't be paid for.
Here in lies the problem. Our friends in Washington are missing the impassible mine field for one grenade. While Professor Kotlikoff estimates that 74% of the fiscal gap is attributed to Medicare, Medicaid and Social Security democrats refuse to even discuss these programs. A bulletin circulated among congressional democrats to encapsulate the bill's talking points stated "Social Security, Medicaid, Veterans Benefits, and other essential benefits are exempt From Cuts."
How can we applaud any pseudo Washington compromise if it takes 74% of the problem off of the table? That means that all cuts come from the other 26% which covers defense, education, roads (i.e., everything else). Any debt legislation that fails to address the address social programs is simply a failure.
The legislation to raise the debt ceiling is a loss for Democrats, the President, Republicans and most of all a loss for the future generations of Americans (and maybe current generations). Republicans and Democrats spent all their political energy to save a meaningless 2.1T over ten years and unfortunately the national momentum to address the issue of our Nation's long term deficits won't pack as much punch during the next or possibly any other debt debate. We allowed Washington to kick the can once more, and the end of the road may be just around the corner.