Veronique de Rugy is a senior research fellow at the MercatusCenter. She was previously a resident fellow at the American Enterprise Institute, a policy analyst at the Cato Institute, and a research fellow at the Atlas Economic Research Foundation. Her research interests include the federal budget, homeland security, taxation, tax competition, and financial privacy issues.
America’s financial situation is unsustainable. In 2009 the federal government spent $3.5 trillion but collected only $2.1 trillion in revenue. The result was a $1.4 trillion deficit, up from $458 billion in 2008. That’s 10 percent of gross domestic product (GDP), a level unseen since World War II. The Congressional Budget Office (CBO) projects that we will be running large deficits for the foreseeable future. According to its data, the annual deficits could average $1 trillion during the next 10 years.
While these figures are dramatic, they pale in comparison to what the federal government owes to foreign and domestic investors. According to the CBO, in 2009 America’s debt held by the public reached $7.5 trillion, or 53 percent of GDP, the highest it has been in 50 years. In 2010 the debt will cross the 60 percent threshold, a level at which many economists believe a country is putting itself in financial peril.
Maybe more importantly, the financial accounting of our financial troubles can lead us to underestimate the gravity of the situation. For instance, while the Department of Treasury’s Financial Statement of the United States depicts the financial situation of the country much more accurately than the Office of Management and Budget’s Budget of the United States, it leaves out some important elements that could hinder lawmakers’ realization of the urgency to address our financial situation. For instance, it accounts accurately for the IOUs in the Social Security Trust Fund, however, fails to account for how the federal government will pay its debt to social security and what it means for our debt levels.
Her testimony, complete with graphs and charts, can be found at:
“Medicare spending growth is the primary driver of the explosion in entitlement spending. The President’s FY 2011 Budget estimates $451 billion in Medicare spending in FY 2010, a 6% increase in Medicare outlays over 2009, as a percentage of GDP. In the long-term, CBO’s baseline projects that Medicare spending will grow by 2.6% annually Moreover, under the CBO’s alternative scenario, which includes likely policy changes, Social Security, Medicare and Medicaid and net interest spending combined are projected to exceed total federal revenue by 2028.
As entitlement spending increases, the indebtedness of the Medicare and Social Security trust funds Programs will increase as well. Over the next 75 years, the federal government has promised benefits for these two programs in excess of anticipated payroll tax revenues equal to $7.7 trillion and $38 trillion, respectively.
The Treasury Department estimates Social Security’s deficit at 1% of GDP over the next 75 years and Medicare’s deficit at 4.8%. With federal revenues estimated to be about 19% of GDP in the long run under current law, taxes would have to rise by about one-third to pay all the promises that have been made for just these two programs.
The Office of Management and Budget estimates that in the absence of massive cuts in Social Security, Medicare and other programs, or an equally massive tax increase, the national debt will rise to 77% of GDP in 2020, 100% of GDP in 2030 and more than twice GDP by 2050.”
Her Conclusion:
“Conclusion
As I’ve shown, the fiscal path of this country is simply unsustainable. The less-than transparent ways in which the federal government goes about accounting for its assets and liabilities does not allow policymakers and agency decision-makers to make informed decisions about the nation’s true fiscal position. I thank you again for the opportunity to testify on this most important topic, and look forward to answering your questions.”
Hat tip to David Paquette for the information contained above.
Remember during the campaign when Joe Biden said it was patriotic to pay your taxes? Well, apparently they want more than money now, they want your life. I showed you a video a few days ago from Council for Foreign Relations member , former Secretary of Labor under Clinton, and advisor to Barack Obama Robert Reich in which he said about government run health care, “If your very old we’re not gonna give you all that technology.. we’re gonna let you die.” Here’s the video again, if you have not seen it yet:
This is very disturbing. Allow me to translate, if you will:
Like a carrot on a stick, when you were young enough to still be gullible, we lured you on with the promise of The Great Society. As a reward for your good citizenship, you were promised social security, Medicare and the ability to save for retirement – tax free. That plan worked pretty good for us. You, well, not so much. Now that we’re in the last phase of sucking your 401k accounts dry and successfully taken the equity you had in your homes, we’ve come up with the final nail in your coffin. This health care thing sounds great, huh? Thing is, we couldn’t possibly afford to pay for everyone’s medical needs. We’ve taken great care to indoctrinate your children into thinking “doing the right thing” means giving to their government and being a good “world citizen”. We’ve told them what they need to know, so there’s no need for them to ask many questions. Family and church, well, they don’t really have time for that. With those big student loans to pay off, they’re going to have to work long hours to make ends meet. That’s good, they’ll be used to working hard and having nothing to show for it. You baby boomers though, well, that’s an issue. You still think the government works for you. Some of you still believe all that crap about the founding fathers, the constitution, freedom of speech, and actual science – you know, like weather has always been cyclical and we have plenty of “energy resources” here at home. Well, there’s just no place for that in American now. Once this health care “reform” passes, it’ll be pretty much in the bag. Biden almost gave it away, as usual. See, once you retire, well, you’re really of no use to us. You can no longer do your “patriotic duty”. Instead you’ll be leaching off us and giving us nothing in return. So, of course we’re going to limit your medical care. That will in turn limit what we pay out in social security, too. It’s a win / win… and really, why would we spend our money on you? You still believe in traditional values, like clinging to your guns and your bible. Once you have free time, you become a danger to us. You start paying attention to everything we say, reading legislation we are attempting to pass, bothering your Representatives and Senators with those constant nasty phone calls.. and those tea parties, give me a break! Your children and grandchildren now clearly understand how selfish it is of you to expect them to pay more in taxes to keep you alive. They’ll have all they can do just to feed their families when we’re done. So see, we’ve got it all figured out. To fight us now is useless. We’ve worked long and hard for decades on this. Sit down, shut up, cash your $250 check, and take it like a good “world citizen”.
And on the subject of indoctrination, Michelle Obama had a post yesterday in US News and World Report:
..My girls are now making new friends, tackling challenging new subjects, and moving closer to becoming the strong, confident women I know they can be. But when I see them come home, bursting with excitement about something they have learned or someone they have met, I can’t help but think that some of the most influential people in my daughters’ lives won’t be the ones they socialize with on the playground or read about in the pages of a book—they will be the people who stand up every day in front of their classrooms. We all remember the impact a special teacher had on us—a teacher who refused to let us fall through the cracks; who pushed us and believed in us when we doubted ourselves; who sparked in us a lifelong curiosity and passion for learning. Decades later, we remember the way they made us feel and the things they inspired us to do—how they challenged us and changed our lives. So it’s not surprising that studies show that the single most important factor affecting students’ achievement is the caliber of their teachers. And when we think about the qualities that make an outstanding teacher—boundless energy and endless patience; vision and a sense of purpose; the creativity to help us see the world in a different way; commitment to helping us discover and fulfill our potential—we realize: These are also the qualities of a great leader. Today, more than ever before, we need precisely this kind of leadership in our classrooms. As the president has frequently said, in a 21st-century global economy where jobs can be shipped to any place with an Internet connection and children here in America will be competing with children around the world for the same jobs, a good education is no longer just one road to opportunity—it is the only road. And good teachers aren’t just critical for the success of our students. They are the key to the success of our economy….
(Obama’s Socialist Economy anyway)
For those who haven’t heard The President asked Congress Wednesday to issue seniors a $250 check – generous, huh?
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