Monday, September 7, 2009
What's the US Real Financial Position?
For a couple of years now people have asked me why I am so deeply concerned about the economy (though it has become self-evident in the past year why I was in an economic funk). I have normally answered that with our leaderships out of control spending and lack of restraint even an entrepreneurial revolution in the US would be choked by the massive debt we call the US Federal Deficit. I have been told I am "crying wolf" and our deficit as a percentage of GDP isn't so high historically, but for some context from someone who should know read the following quotes from David Walker, former head of the Government Accountability Office, the nation's auditor-in-chief.
"Our off balance sheet obligations associated with Social Security and Medicare put us in a $56 trillion financial hole—and that's before the recession was officially declared last year. America now owes more than Americans are worth—and the gap is growing!" Walker follows with further context:
"Our $56 trillion in unfunded obligations amount to $483,000 per household. That's 10 times the median household income—so it's as if everyone had a second or third mortgage on a house equal to 10 times their income but no house they can lay claim to." As for this year's likely deficit of $1.8 trillion, Mr. Walker suggests its size be conveyed thusly: "A deficit that large is $3.4 million a minute, $200 million an hour, $5 billion a day," he says. That does indeed put things into perspective. When asked if there was hope on the horizon for reform he said the following:
"We have four deficits: a budget deficit, a savings deficit, a value-of-the-dollar deficit and a leadership deficit," he tells one group. "We are treating the symptoms of those deficits, but not the disease."
Mr. Walker identifies the disease as having a basic cause: "Washington is totally out of touch and out of control," he sighs. "There is political courage there, but there is far more political careerism and people dodging real solutions." He identifies entrenched incumbency as a real obstacle to change. "Members of Congress ensure they have gerrymandered seats where they pick the voters rather than the voters picking them and then they pass out money to special interests who then make sure they have so much money that no one can easily challenge them," he laments. He believes gerrymandering should be curbed and term limits imposed if for no other reason than to inject some new blood into the system. On campaign finance, he supports a narrow constitutional amendment that would bar congressional candidates from accepting contributions from people who can't vote for them: "If people can't vote in a district not their own, should we allow them to spend unlimited money on behalf of someone across the country?"
These remarks and those from others I respect are the reason for my pessimism. I hope and pray for men and women of courage and integrity. I see no reason for optimism short of a reformation in the hearts and minds of our leaders who choose to serve and submit to the love of others over self.
Quotes taken from John Fund article at WSJ.com