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The Moral Problem of National Debt
In September I attended the Fiscal Wake-Up Tour: a series of public forums held around the nation by the U.S. Government Accountability Office that address the nation's fiscal policy. The GAO is considered "the congressional watch dog" and helps ensure the accountability of the Federal Government for the benefit of the American people. Comptroller General David Walker spoke along with a panel of experts who study the nation's financial situation.
Their message was clear: we are headed for an intergenerational fiscal crisis. The time is now to publicly address these issues or our future generations will be forced to pay the price.
Panelist Robert Bixby explains, "Our nation is undergoing a dramatic demographic transformation to an older society. And we're doing that against a back drop of steadily rising health care costs and steadily falling national savings. That is a very dangers combination for the future health of the economy."
Today the United States carries over $9 trillion in debt, and that number continues to grow rapidly. Like oil and the Middle East, our dependence on foreign investors increases as we borrow more money. Next year the first baby boomer retires, setting off a chain reaction of social promises such as Social Security and Medicare. Because the boomer generation is so large, the imbalance between deposits and withdrawals for these programs will begin to weigh heavily on the nation's already oversized budget. We've gone from $20 trillion in liabilities and unfunded commitments in 2000 to $50 trillion in 2006. "That's $435,000 per American household. The median household income in the United States is $36,000. That's a 9-to-1 debt-to-income ratio and it's going up every second," David Walker said.
We simply can't afford the lifestyle we live today. If debt keeps piling on it will become impossible for future generations to ever pay it back. To put things more into perspective, Americans spent $227 billion last year on deficits - almost twice of what was spent on the Iraq war.
Striving for intergenerational fiscal sustainability should be a priority for every American. Walker says "It's not about numbers, it's about values." America needs to get out of debt and begin investing in its future.
Listen to the Fiscal Wake-Up Tour @ the Commonwealth Club in San Francisco
(Fiat money makes debt bubbles possible. Being on the gold standard meant we would have to give up all our gold before we got into serious debt. Sound monetary policy brings financial stability.)
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