Aug. 17, 2021 –
Question: What happens if you spend beyond your means?
Your likely answer: “It puts my finances at risk and destroys my hope for a good life.”
That’s right. You won’t have enough money to buy food or other necessities. You won’t be able to pay your bills. Nor would you be able to invest nor buy any luxuries you want. In essence, your life would be without any hope.
But that’s what politicians are doing to us as a nation. The Biden Administration, Democrats and Republicans, too, are killing America’s future.
Their reckless spending is uncontrollably increasing the massive federal debt each second:
To further threaten America’s future, President Biden wants the nation to increase its debt by another $6 trillion, which means more massive pork spending and higher taxes.
Why?
Some 77 percent of the massive amount is wasteful as only 23 percent of his proposed spending is warranted for our common welfare and justifiable for our infrastructure (see what’s inside Biden’s $6 trillion proposal).
Debt implications
All of this affects everyone. Yes, the national debt hurts you.
Have we not learned any lessons from the horrors of the Great Recession? Apparently not.
Bankruptcies skyrocketed. Businesses folded.
You might remember the collapse of a global investment bank with $400 billion in assets, and 85 years of storied success and deep roots with every big Wall Street bank.
Recall the collapse of the Bear Stearns bubble during the Obama Administration and the launch of the worst fiscal crisis since the 1930s.
Afterward, Congress enacted Dodd-Frank financial reforms and the Troubled Asset Relief Program (TARP) to approve $700 million in bonds to bail out the banks and resurrect the economy.
Should another crisis occur, it’s increasingly clear that the federal government will not be able again to bail out any institutions as a result of the annual trillion-dollar budget deficits.
It’s shocking and noteworthy that American taxpayers and even young children own nearly 80 percent of the debt.
It’s shocking and noteworthy that American taxpayers and even young children own nearly 80 percent of the national debt.
To give you an idea of the amounts of debt and the debt breakdown from February 2021, here’s the Monthly Treasury Statement from the U.S. Treasury:
- Social Security trusts, including the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds: $2.90 trillion
- Office of Personnel Management Retirement: $955.1 billion
- Military Retirement Fund: $1.01 trillion. This has become a big issue in funding our nation’s defense and is only expected to grow.
- Medicare, which includes the Federal Supplementary Medical Insurance Trust Fund: $304.4 billion
- Cash on hand to fund federal government operations: $723 billion
More sad Treasury news, here’s who held the public debt as of March 2021
- Foreign: $7.07 trillion (in September 2020, Japan owned $1.28 trillion and China owned $1.06 trillion of U.S. debt, which is more than a third of foreign holdings)
- Federal Reserve and government: $10.81 trillion (December 2020)
- Mutual funds: $3.5 trillion
- State and local governments, including their pension funds: $1.09 trillion
- Private pension funds: $784 billion
- Insurance companies: $253 billion
- U.S. savings bonds: $147 billion (December 2020)
- Other holders, including individuals, government-sponsored enterprises, brokers and dealers, banks, bank personal trusts and estates, corporate and non-corporate businesses, and other investors: $2.28 trillion
Yes, some of the money actually comes in the form of bailouts from foreigners, and the U.S. has little likelihood of easily borrowing more money to ease threats from the next fiscal crisis.
Foreign countries do this to support their monetary systems because the dollar is still the world’s primary currency. But U.S. government bonds are no longer considered a premium because of the weak dollar and high federal debt.
Plus, Bitcoin could become the global currency.
Plus, Bitcoin could become the global currency.
Higher interest rates
To offset the fiscal risk, foreign investors are likely to insist on getting higher interest rates before buying more U.S. Treasuries.
But if America pays higher interest rates, this will kill the U.S. economy as it increases the threat of massive tax increases and draconian budget cuts with a return to corporate debt and mortgage defaults.
Historically, no nation has ever survived such fiscal dysfunction without implementing severe austere measures or borrowing money.
Despite their denials, many Republicans love pork spending just as much as their political opponents, the politicians they like to label as tax-and-spend Democrats.
Fiscal dysfunction
Democrats favor income redistribution. Meantime, entitlements and interest payments devour two-thirds of tax revenue.
At least 5 percent of working-age Americans draw Social Security disability payments. That’s twice the rate of three decades ago.
At the behest of Democrats, millions of Americans choose to get handouts: Food stamps, Medicaid and other entitlements.
But Republicans in welfare-dependent states favor entitlement spending to dole out benefits, too, in order to get re-elected.
Blown economic opportunity
Republicans complained when they learned former Secretary of State Rex Tillerson hired fewer employees to save $31 million annually.
Remember many Republicans opposed the 2018 Trump budget and tariff policy designed to produce strategic aluminum and steel to secure the national defense, balance the nation’s trade, and to reduce the federal red ink to continue grow GDP.
You might also recall 2017 when both sides of the aisle in Congress ignored the presidential budget proposal that would have balanced the federal budget in 10 years.
You might also recall 2017 when both sides of the aisle in Congress ignored the presidential budget proposal that would have balanced the federal budget in 10 years.
Even conservative Republicans also cited the prospect of a trade war. But they obfuscated the facts – we’re already in trade wars.
Bottom-line
Americans have a misconception. It’s a falsehood that most of the U.S. debt is owed to countries such as China and Japan. No. The debt is owed to Social Security and pension funds.
This means every American owns part of the lion’s share of the nation’s debt.
Even though solutions will sacrifice economic growth, only enormous spending cuts and higher taxes will save America’s future.
The Biden Administration, along with Democrat and Republican leaders in Congress show little wisdom and courage to implement better policy. Unless they do, the nation’s fiscal situation will deteriorate beyond repair.
From the Coach’s Corner, here are more public-policy articles.
“Good judgment comes from experience, and a lot of that comes from bad judgment.”
-Will Rogers
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