Why Our Debt is Much More Than $15 Trillion

In last week’s column, I offered my predictions for the New Year; one of my predictions was that our debt would reach $20 trillion by the end of this year. One reader questioned that figure, so I will expound on my reasons and explain why I believe the debt crisis is so dire.

First, it is important to remember that the debt stood at about $13 trillion just three months ago and currently stands at $15 trillion – I fear that I may be too conservative in my forecast for this year.

Why did the debt increase so much in such a short period of time? The most significant reason is that we borrowed another trillion dollars from China. The second is that we increase debt dramatically every hour due to the interest owed on our borrowing – the interest alone will probably be sufficient to cause our debt to surge to the $20 trillion mark.

Additionally, America faces many world crises that have the potential for substantial escalations in government spending. Iran and North Korea both bring the threat of nuclear war to the Middle East, Japan and South Korea. The cost of keeping these emerging nuclear powers under control may end up being staggering, but not keeping them under control could be even more costly. It is very likely that, as we are bringing our troops home from Iraq, we may be deploying them to new and even more dangerous sites in the near future.

We already know that the current administration is determined to leave Israel on its own with Iran. Our position at this time is to continue economic sanctions against Iran – this has been our policy for years and it has never yielded results. Many experts are certain that Israel is on the verge of a pre-emptive strike against Iran. Whether Israel launches the attack or America steps in, the consequence is that America will be involved in a costly and crucial struggle. The truth is that world is not a safe place and it likely never will be – such is the nature of man and international relations. There is never a time when we can stand down, militarily. That is sad, but it is the truth.

Of course, the real danger to our economic future pivots on what many like to term ‘entitlements.’ Currently, we are looking at the problem of Social Security and Medicare/Medicaid – to call these programs ‘entitlements’ is a real misnomer, in my opinion. Working Americans paid into these programs with each paycheck, but the government mismanaged their money by borrowing from the funds. The government now claims they cannot pay its debt to the American people, so they call these programs entitlements – making this program seem more like government hand-outs, than a legitimate payments owed to taxpayers. Whatever we call it, semantics will not cure this dilemma.

One of the issues that complicates the Medicare/Medicaid system is that we have a growing population of elderly who are using up the funds. Tax money currently falls short of paying for the cost of health care for seniors. Exacerbating the problem is the fact that surging numbers of baby boomers are now reaching the eligibility age for Medicare; as the numbers increase and the cost of treatments increase, the financial drain on the system multiplies rapidly as this chart clearly shows.

www.money.cnn

Our unfunded liability for Medicare based on the people that are presently enrolled is $25 trillion according to USA Today.  This figure may be very conservative also since it relies on changes to the laws which will probably not happen such as cutting doctors payments by 30%. 

Unfortunately, Social Security stands at an equally dangerous figure. The projections for Social Security show an unfunded debt of almost $22 trillion dollars due to the increased numbers of people coming on board in the program and the ratio of funds currently being paid by workers. 

The Heritage Foundation warns that Medicare, Medicaid and Social Security will consume our entire tax revenue by 2040. This chart shows the problem clearly.

www.heritage.org

Add in $3.6 trillion for military obligations, $2 trillion in Federal government employees’ retirement, $5.2 trillion for State and local government obligations and a myriad of other obligations as well as the current $15 trillion in debt and we are staring into the face of almost $100 trillion dollars of debt in the very near future. 

Many reason that there is no solution to this staggering debt other than to raise taxes; in particular, raise taxes on the rich (economic experts agree that taking all of wealthiest Americans money would not fix the problem) or to cut out so-called entitlements. It is clear that the last option is the only one that can reduce this debt sufficiently, but at what cost? At the cost of the very credibility of our government and all of the men and women that have administered it since Roosevelt. Can we afford to just dump our elderly off the cliff? I don’t really see that as a humane option. If we do commit that sin against our elderly, we will be guilty of having stolen all of their money, trust and their lives. 

John Wayne Tucker 

http://johnwaynetucker.com/congress