This article was originally published by Leslie Rubin and Daniel J. Mitchell at the Foundation for Economic Education.
The United States is in fiscal trouble. The burden of government spending has increased by nearly $3 trillion over the past 10 years—nearly doubling in just one decade! And that means more resources diverted from the economy’s productive sector, which is bad news whether the spending is financed by taxes, borrowing, or money printing.
To make matters worse, the burden of spending will get even heavier in the coming decades, mostly because politicians have saddled the nation with poorly designed entitlement programs that make no sense given our aging population. What’s more, Washington has dozens of ill-conceived programs ostensibly to help the needy, but they are riddled with perverse incentives that promote the opposite of what was intended.
If politicians continue to bury their heads in the sand, bad things will happen:
- Radical, economy-sapping tax increases, including perhaps a value-added tax, which is a hidden form of national sales tax that has given European politicians an excuse to create enormous welfare states—leading to economic stagnation.
- Reckless monetary policy as short-sighted politicians adopt the Venezuelan tactic of financing the government with the printing press—thereby compounding the damage of bad fiscal policy with bad monetary policy.
- Massive increases in red ink. Our own Treasury Department says in its annual report that “the current fiscal path is unsustainable” because of numbers such as:
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- $34 trillion in interest-bearing debt as of December 2023 and rising rapidly.
- $128 trillion in total obligations, including unfunded obligations to Social Security and Medicare as of September 2023 (the latest data available).
- $18.2 trillion in additional interest-bearing debt projected by the CBO over the next 10 years if we do not add any new programs.
- $150+ trillion in interest-bearing debt in 30 years if we do not change our programs.
A Ponzi Scheme
Our federal government continues to spend endlessly and has no way of making the numbers work. For all intents and purposes, Uncle Sam is running a Ponzi scheme as he has no way to pay back the debt other than borrow more money. Our Congressional leaders are paying no heed; they just keep on “spending like a drunken sailor,” referring to an old Navy cliché. Well, as President Reagan often quipped, that’s an insult to our sailors, because “at least a drunken sailor spends his own money.” Additionally, Modern Monetary Theory enthusiasts say that the country can borrow endlessly with no harmful effects. How? By printing money! Only an idiot would believe that—it is the furthest thing from true reality.
All this sounds horrible because it is horrible. To raise the alarm, we’ve written a book, The Greatest Ponzi Scheme on Earth, that explains America’s fiscal mess. It explains how we got in trouble and how we will suffer an economic crisis if we leave policy on autopilot.
That’s the bad news.
The good news is that our book shows that there are reasonable solutions. All that is needed is for government spending to grow slower than the economy. In other words, put the government on a diet. Politicians could still increase spending, but only by modest amounts. Maybe 2 percent annual spending increases rather than the 7+ percent spending increases that we’ve seen over the past 10 years.
In our book, we show examples of countries that have long-run spending restraints (super-successful economies such as Switzerland and Singapore). But we also show examples of nations that dug themselves out of fiscal trouble merely by having multi-year periods of spending restraint. And if countries such as New Zealand, Canada, and Sweden can address their fiscal problems, surely we should demand the same from the crowd in Washington.
The Debt Bomb
The late Senator Tom Coburn (R-OK) wrote a book in 2010 called The Debt Bomb. He was not a professional politician; he was a physician who was interested in the welfare of this country—a true statesman. He was totally frustrated by his inability to get fiscal sanity in DC and wrote about what he saw coming. He predicted big problems if we did not move back to fiscal sanity. We strongly encourage you to read it to get an insider’s view of what Coburn tried to do.
His worst fears are coming true right before our eyes, today.
The “debt bomb” is ticking, and if left unchecked it will explode one day when we can no longer support our spending habit by borrowing more money from investors. When that day comes, we will be faced with several choices, all of them quite bad. The government could print more money, which would result in disastrous hyperinflation—think Venezuela. The United States could default on the debt, resulting in national and worldwide economic chaos. Lastly, Congress could try to balance the budget while maintaining the debt, an impossibility as the government would not even have enough income to meet its debt obligations, much less its operating expenses. That really results in default.
Kicking the can down the road solves nothing and makes the situation worse. It is a recipe for disaster.
There is a fire raging, and no one is paying attention. Does anyone care? Do you care?
Public Education
Only an educated public will recognize the problem and demand that it be fixed. As Americans, it’s time for us to “get it.” Quit being the silent majority, and take an active role in fixing the problem. The citizens of this great country must make our voices heard. Do something. Speak up. Speak out.
The solution requires that Congress makes some politically difficult choices, and that will not happen without mass public support. Only with informed public support will our Congressional leaders take notice and fix the problem.
Abraham Lincoln said it best, “with public support anything is possible.”
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