Unlike what the Left would have you believe, the biggest danger facing our country isn’t climate change or terrorism. No, the biggest threat to our country comes from within. Our fiscal house is a disaster. The federal debt has ballooned over the past ten years and no one has seemed to care.
President Trump has proposed a plan—granted, not a perfect one—that attempts to cut the budget deficit in half over the next fifteen years.
Fox News reported, “The budget’s most significant policy prescriptions – an immediate 5% cut to non-defense agency budgets passed by Congress and $700 billion in cuts to Medicaid over a decade – are part of a plan to cut $4.4 trillion in government spending over 10 years.
Trump has proposed modest adjustments to eligibility for Social Security disability benefits and $465 billion in cuts to Medicare providers such as hospitals, but the real cost drivers of Medicare and Social Security are the ongoing retirement surge of the baby-boom generation and healthcare costs that continue to outpace inflation. Trump’s budget would not touch individuals’ benefits for Medicare.”
The budget will likely be dead on arrival due to the Democrats’ control of the House of Representatives, but it is a positive symbolic step, something the Republicans could take up if they reclaim the House in November.
According to the U.S. Treasury Department’s Office of Debt Management, the U.S. government is just five years away from the point where every dollar it borrows from the public will go toward funding interest payments on the national debt.
For example, when the U.S. borrows money from say, China, the funds that we receive from them and other countries will go toward repaying the interest from other loans they loaned us in the past.
Think about that for a moment: We are borrowing from the same countries that we are using the funds to repay.
Only in the swamp of D.C. does that make any rational sense.
However, the laws of economics don’t change because of the wishes of ignorant politicians and central bankers. Like death, no one escapes bankruptcy.
But the U.S. doesn’t just need this money to pay for interest on the national debt. The treasury also needs this money to pay for out of control government spending.
The national debt (fiscal operating debt) currently stands at over $22 trillion. That is a staggering number; however, that is on the low end of how much the country really owns.
In 2015, a Boston University Economics professor stated that the actual national debt is $215 trillion!
That is because the currently reported total ($22 trillion) only accounts for current debt. The real total is higher because it takes into effect future debts, also known as “unfunded liabilities.”
Medicare, Social Security, and Medicaid account for 60% of the federal government’s spending. It is mandatory spending, which means it must be funded every year without any debate.
As Baby Boomers keep on retiring, the funding required for these retirees is going to increase spending and require more borrowing.
This will create a debt-funding death spiral. Currently, the workforce is 60% of the population; within the next decade and beyond the percentage will drop to 54%. That means fewer workers will be required to fund growing government spending.
It is inevitable that interest rates will rise as more borrowing is required. Foreign and domestic creditors will require interest payments to compensate for risk. This will reverberate across the economy making it more expensive for businesses and consumers alike to borrow, which will hurt business investment and consumption spending.
The future of our country will hinge on whether politicians will come to their senses and cut and restructure government spending. However, I won’t hold my breath.
At least President Trump seems to get it.