"We have had the party, and now will leave the mess for our kids, grand kids and beyond to clean up."
If you ever go to a social gathering and want to be looked upon as a bore, or have people's eyes roll backwards, bring up the subject of our national debt. Many, if not most people don't care, don't want to know, or both. However, I will tell you right now that our national debt is one of the largest threats, maybe the largest threat we have ever had to our economic well being. As with the old saying "bad news does not get better with age", this issue does nothing but get worse every day.
Now I, like many, am no stranger to debt. When we first got married, we were students and had basically nothing. By 1976 we were out of school and working at our first jobs. Shortly thereafter we bought our first house. Forgetting the budgeting lessons we learned when we were students, our consumer debt started to get out of hand. The problem was recognized, screws were tightened, fun things were postponed, and we worked out of it.
A woman I worked with at my first company had just moved here from Chicago. Both she and her husband had MBA degrees from Northwestern. She and I got to be good friends and often had coffee together. One day she confided me she and her husband together made over $75,000 (a HUGE amount in 1977). Then she told me they were going broke and might have to sell just about everything. I was speechless. Here were two people with MBA degrees from one of the finest business schools in the country, and they could not manage their own personal finances. My conclusion from that conversation was it is not how much you make, it is how much you spend. Or as my wife says, "if the back door is open, it does not matter how much money you shovel in the front door".
Our national debt is very similar to my friend from 1977. We take in a huge amount of money in this country. If you take into consideration federal income tax, state income tax, FICA, wheelage taxes, property taxes, sales tax, gas tax, communication taxes, usage taxes, imputed taxes and so on, most middle class people pay about half what they earn in taxes. In other words, we take in lots and lots of money in this country. However, we have a "back door" problem.
The chart above is from a web site that I have encouraged everyone I know to bookmark. It is a real time estimate of our national debt. The numbers move so fast on this chart they are almost blurry. As you can see, NOTHING that has been tried to date has slowed down this runaway train. The impact of having debt this high will be reduced credit rating (already happened), possible hyper inflation or even deflation. Our dollar will continue to be worth less and before long we will be like Greece or Spain on steroids.
The national debt clock is very useful. It contains a myriad of information. You can not only see the nation's debt (just coming up on $17T). We have had the party, and now will leave the mess for our kids, grand kids and beyond to clean up.), but you can also check the debt on different states. Also, you can see how the national debt affects each citizen as well as each family. However, my favorite feature is the time machine. You can go forward four years and see four different estimates of where the debt will be. The most conservative is the CBO -which believes the debt will be $18T in four years. One the other extreme is the status quo estimate. If the debt continues to grow as it has, the debt will be $22T in four years. Whichever estimate you believe in, we are in deep, deep trouble.
None of us (I hope) would go out tomorrow, spend all our money and max out our credit cards. We would spend ourselves penniless and leave a mountain of debt for our kids to deal with. This is so ridiculous, people laugh when you spell out this scenario. However, on a national scale this is exactly what we are doing. We have had the party, and now will leave the mess for our kids, grand kids and beyond to clean up. Our two political parties are two drunks leaning against each other when addressing this topic. Nobody is blameless. We do not have the national needed to cage this monster. And the day of reckoning will soon be upon us.
What to do? For starters, immediately enact Simpson Bowles. Our debt is so out of control that even with the Draconian cuts and revenue changes that Simpson Bowles prescribes, the debt will continue to grow, only not as quickly. As doctors in a trauma unit know, with an injured person, stop (or slow down) the bleeding. Simpson Bowles will do that. Next, throw out the tax code and replace it with something so simple, a kid can understand it. One to three tax rates, zero deductions. No more social engineering, no more politicking with the code. Very simple, very easy. Get rid of fiscal "black holes" in the government - for a start the Department of Energy, Department of Education and Department of Commerce. Demand an amendment to the constitution mandating an annual balanced budget. I know it sounds weird, but it would mean having the government run like our households. Money in equals money out. Pure rocket science.
We are about out of time folks. The party is over and the guests have gone home. All that remains is the mess to clean up. We can face this debt with the same courage and resolve we have with so many other critical issues in our history, or we can continue to do nothing and drive off the cliff, Thelma and Louise style. If this debt does become our Waterloo, may our children forgive us for what we have done to the country we inherited from our parents.
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