High Debt, Low Integrity

Mon, Oct 21, 2013 - 8:07am

The government shutdown is over. It is back to business as usual – that is, the usual business of out-of-control government spending. As of this writing, the U.S. national debt is over $17 trillion which amounts to $53,764 per citizen, $148,756 per taxpayer (according to USDebtClock.org). The six largest federal budget items are, in order: (1) Medicare/Medicaid ($860 billion); (2) Social Security ($812 billion); (3) Defense/Wars ($607 billion); (4) income security ($349 billion); (5) net interest on the debt ($261 billion); and (6) federal pensions ($229 billion). These sums are astronomical, and signal financial crisis or national degeneracy or both.

The gross government debt (federal, state and local) to GDP ratio is currently 106.9 percent. The government spending to GDP ratio is nearly 39 percent. It is a level of spending which cannot be sustained indefinitely. It would appear that our course is set to break the dollar as the world’s reserve currency or accomplish something that is, in political terms, practically impossible; for government spending is set to rise dramatically in the coming months and years. In this regard, please note the two largest budgetary items are Medicare/Medicaid and Social Security. We have good reason to expect entitlement cost increases because of the vast number of citizens approaching retirement age.

Economic historian Niall Ferguson has written a piece touching on this subject, titled, On Knowing What I and the CBO Know, in which he states that “spending on entitlements has continued to rise – and will rise inexorably in the coming years.” Ferguson has explained the reasons for this in previous books and publications. The baby boomer generation is now entering retirement. The percentage of persons over 65-years-of-age is growing steadily. This is creating an enormous entitlement crush. As Ferguson explained, “The question that matters is whether the CBO now thinks the fiscal position is going to improve or deteriorate in the future, relative to where we are today. And the answer … is that it is almost certainly going to deteriorate unless there is a significant increase in revenues or reduction in entitlement spending.”

Raising revenues is unattractive because it signifies the strangulation of the economy. Cutting entitlements is unattractive because large segments of the population now depend on those entitlements to live. The grim alternatives are plainly set before us. Ferguson concludes that “entitlement spending is indeed the main reason for the projected increase in the federal debt….” And for all that, there is no easy way out. Even the best institutions, Ferguson noted in an interview, tend to deteriorate over time – including those based on the U.S. Constitution.

With regard to the roots of this crisis Ferguson has written a book titled The Great Degeneration: How Institutions and Economies Die which George Melloan praised in The Wall Street Journal as “A Jeremiad to Heed.” The prophet Jeremiah was right, after all, and so is Ferguson, says Melloan. Previously an optimist about the United States and its economy, Ferguson was sobered by the events of 2008. “The West is stagnating,” his book admits, “and not only in economic terms.” Ferguson asks why this is happening and who is doing it.

This question touches on a key that opens many doors, where the erosion of integrity long ago prefigured a series of intellectual and moral indecencies. It is not simply a matter of repairing our indebtedness; for this indebtedness merely serves as an outward symptom of failed vigilance, of deeply ingrained reckless tendencies. “Certainly there are few precedents for the scale of debt in the West today,” says Ferguson. “This is only the second time in American history that combined public and private debt has exceeded 250 percent of GDP.”

Why has this happened? In brief, the state has grown into a cancer – a leveling monster that cannot be restrained. It cannot be restrained because it is the product of our own making. We are the authors of this profligacy; and I fear that in our present state of degeneracy we are more likely to join the party of plunder than rally to fiscal sanity. Who is bold enough to propose austerity at the present time? How many baby boomers, now retiring, would readily forego their Medicare and Social Security in order to save the federal budget?

The answer must be a very low number indeed.

About the Author

jrnyquist [at] aol [dot] com ()