Sunday, October 15, 2006

US Should File for Bankruptcy?

I've been a little more curious about the state of our nation during this political season, and the more I learn the more I become concerned. And my concern is largely about the financial health of our country.

Since September, 2001, our national debt has increased $2.6 trillion, which converts to more than $6,600 for every person in the United States. The total debt is $8.5 trillion, or over $26,000 for every person. Interest on this debt, at a low rate of only 4%, is $340 billion every year.

To put the debt in perspective, the 2006 budget for the United States is $2.3 trillion, which makes the debt about four times the annual spending. This is would be like a family that made $100,000 per year having a net long term debt of $400,000 - that is, liabilities exceed assets by $400,000. This family would never be able to get a loan. It's a miracle that President Bush and the congress can borrow more money while our country's debt continues to grow.

The major U.S. social programs, Social Security and Medicare, are also under water. President Bush's Secretary of the Treasury, John Snow, reports that Social Security will begin spending more than it earns in 2017, and will be completely unfunded by 2040. Medicare, however, is in much deeper trouble - virually hopeless, in fact. With the national debt being so large, the U.S. government cannot bail out either Social Security or Medicare. Tragedy lurks ahead!

It's amazing that our elected officials seldom mention these problems, and in many cases they pooh-pooh them. There is no magical solution for them, however, and every year our country becomes more at risk for bankruptcy. If the U.S. defaults, the entire world economy will fail and we will have the greatest depression in history. It would probably be better, therefore, if we got on top of our annual budget deficits and our entitlements. Nobody loves a deadbeat, especially if it's our old friend Uncle Sam.

1 comment:

1138 said...

We are close to the point (if not past it) where our debts exceed out assets and our ability to generate income.
I'd say that's a case for bankruptcy - of course there's no magic in bankruptcy though and that means that the debt will still have to be paid for generations to come.

Added you to my links on Liberty lost.