Centerblue.org

Little noticed in the cacophony of Christmas, celebrating Democrats, and a wardrum-beating President was this report from the United States Treasury. Its conclusions summed up in one sentence: America is insolvent, bankrupt, unable to meet its obligations. Yes, America–the most powerful empire in the history of the world, stands to go bankrupt trying to make good on its promises and yet the band plays on, blithely unaware.

The report doesn’t mince words, with language readily available for anyone to see if they cared.

Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.

As this long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008.

Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance. (emphasis added)

Do you know how much $50 trillion is? If you sold every piece of property in America, every house, every skyscraper, every factory, every highway, every power plant–and left the land in the pristine condition discovered by Christopher Columbus, you would generate approximately $50 trillion. That is the magnitude of the hole in which the country finds itself in.

With regards to the federal entitlement programs of Social Security, Medicare, and Medicaid:

The net social insurance responsibilities scheduled benefits in excess of estimated revenues indicate that those programs are on an unsustainable fiscal path and difficult choices will be necessary in order to address their large and growing long-term fiscal imbalance.

Delay is costly and choices will be more difficult as the retirement of the ‘baby boom’ gets closer to becoming a reality with the first wave of boomers eligible for retirement under Social Security in 2008. (emphasis added)

There is no way to just “grow” out of this problem. As Dr. Chris Martenson over at Financial Sense University points out, the report’s statement of liability is assuming a steady 5% growth in the economy each year through at least 2011. That assumes there will be no recession during that time period–and even this year’s sub-par growth alone shows that 5% is not sustainable. Furthermore, the country’s liabilities more than doubled between 2000 and 2006, from $20 trillion to $50+ trillion. No amount of growth can overcome such a gargantuan increase in such a short time.

The net result of all this is that our national wealth and standard of living is set to take a precipitous decline in the years ahead. Let’s face it–the government is not going to default…it’s going to have to make some painful choices at some point. Someday some hapless president is going to sit before the cameras and tell the American people that he’s very sorry, but the country has promised far more than it can deliver, and that Medicare/Medicaid/Social Security are from now on either cancelled entirely, or severely pared back along with a drastic tax increase.

Those of you not saving up for retirement, hoping that these programs will carry you through old age: prepare to live under a bridge, because that’s about all the government will be able to afford for you unless it does something pretty drastic very soon.

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This massive problem is why, despite the opposition of my friends on the Left, I actually favored exploring Bush’s plan to create private spending accounts for Social Security (they’d do nothing for Medicare and Medicaid, but let’s solve one problem at a time)–accompanied by removing the $94,200 cap on yearly income subject to federal entitlement withholding (which he did not propose and should have). We have to do something, and the approach taken by the Democrats during that debate–the “do nothing” approach–is simply not acceptable.

Bush’s plan would have given everyone the option (not the obligation) to have their own withholdings diverted to a private account they could then manage through investments in the stock or bond markets. People who opted to do that would then be entitled to either draw less or not at all from the government upon retirement. Anyone who opted to keep paying to the government would be guaranteed his entitlement in full upon retirement.

Personally I’d love to manage that money myself; I’m confident I could earn a better return than the government could. Nevertheless, liberals came up with some very bad excuses as to why this wouldn’t work:

1) It’s risky to invest in the stock market given its ups and downs. Yea well it’s risky to promise everyone a retirement safety net that the government simply can’t afford. The risk of that is that you’ll get little or nothing. How does that compare to the risk of investing in the stock market, where for every 30 year period in the past the market has been higher than it was 30 years prior regardless of wars, deficits, and other problems?

2) If you invest unwisely, you’ll be stuck/starve. OH WELL, too bad. That’s the risk I took, fully aware of the consequences. I’ll starve just as much if we do nothing and the government can’t pay…so I might as well try to do something about it.

3) If too many people leave the system, there won’t be enough to pay those who don’t. This may have a grain of truth to it, but it’s addressable. I would want to see a study done on this, but it’s certainly possible that the higher income earners are the ones most likely to leave the system and invest privately, leaving less money from lower income earners in the pool to distribute among those who remain. This is easily addressable, however: set a sliding scale such as the higher your income, the less you can funnel to a private account..until that amount eventually dwindles to zero and goes entirely into the federal system. Those CEO’s making $40 million bonuses don’t need social security anyway…and neither does anyone with a substantial income that is better able to save for retirement himself….so say that anyone who makes more than $200,000, for example, has all his social security tax diverted to the government instead of to private accounts (this assumes the lifting of the $94,200 cap). Problem solved.

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We need some bold ideas to deal with some drastic problems–and we have yet to hear of a plan for Medicare/Medicaid. Democrats either need to come up with a better plan for social security, or they need to shut up. Doing nothing is just not acceptable and is a disservice to our country’s future. Let’s leave the “do nothing” label to the Republicans, under whose watch all the nation’s liabilities more than doubled in just six years.