Saturday, 25 October, 2008 0:55 AM
A $17 Trillion National
Debt by 2009: What this mess Really Means for You.
best-selling author explains why Washington is hoping you won't
notice...and what it means to your future...
NJ — Panic on Wall Street! Confusion in Washington!Recession?
Depression? Inflation? Deflation? Turn on any news show, read your
favorite blog or pick up the morning paper and you will be crushed
by an avalanche of information on the nation's economy. But who
knows what's really happening? Economic expert Addison Wiggin says
you owe it to your country and your future to find out the truth
about this disaster—and don't expect the government to be
amazing how poorly the bailout plan and our economic situation in
general have been explained to the public," says Addison Wiggin,
coauthor along with Kate Incontrera of I.O.U.S.A.: One Nation.
Under Stress. In Debt. (Wiley, September 2008, ISBN: 978-0-470-22277-5,
$19.95). "In the government's haste to pass the plan and the
turmoil surrounding stock market plummets that followed, the long-term
implications of our economic turmoil have been ignored, or at least
Wiggin consults "The Mount Rushmore Crowd" of the
American economic scene—luminaries like Warren Buffett, Alan
Greenspan, Paul Volcker, Robert Rubin, Paul O'Neill, Ron Paul, Arthur
Laffer, Steve Forbes, William Bonner, and more—to shed light
on the economic challenges facing the nation.
are entering an economic cycle that happens only once every few
generations," says Wiggin. "And while our politicians
seem to have just recently discovered what a challenge it's going
to be, the truth is the economy has been on a precarious path for
some time, including, but not limited to, the out-of-control spending
habits of the federal government and a complicit, credit-addicted
illuminates today's financial crisis in a unique and easy-to-grasp
way by examining four serious "deficits" the nation faces—the
budget deficit, the personal savings deficit, the trade deficit,
and most importantly, the leadership deficit. The book serves as
a companion to the critically acclaimed documentary of the same
name—a national debt documentary that was nominated for the
Grand Jury Prize at the 2008 Sundance Film Festival.
What America's Economic Mess Means
National Debt. A couple of weeks ago when America's debt
surpassed the $10 trillion mark, the National Debt Clock in Times
Square ran out of digits. There may not be a better indicator that
the U.S. is drowning in debt. The passing of the $700 billion bailout
only increased our debt woes, because in order to approve the bailout
plan, Congress had to raise the debt ceiling for a second time this
year to a whopping $11.3 trillion dollars. If we actually do hit
the $11.3 trillion dollar mark, our debt will then make up over
70 percent of our GDP.
only the beginning. During the first 16 days of this fiscal year,
the debt increased by another $300 billion. That's an annual growth
rate of 75 percent. At this pace, we're going to owe $17 trillion
by this time next year. That would be over 120 percent of our GDP—roughly
equivalent to the nation's debt after World War II.
bailout only increases the problems we will have trying to pay down
the federal debt," says Wiggin. "Aside from its gargantuan
size, the biggest problem with our debt today is how it is funded.
During another historic pay-down period following World War II,
the federal debt was funded using savings bonds bought by Americans.
So though our debt level was high, at least our government was mostly
in debt only to its own citizens. That's no longer the case. Today,
half of our debt is gobbled up by foreign central banks and investors,
most notably China, Japan, and the oil exporting countries.
debt, in and of itself, is not a bad thing," he adds. "But
it does put future financial decisions in the hands of people who
may or may not have the United States' interests in mind when they
go to make them. It will be better for America and future Americans
if we make tough decisions now and bring our debt and dependence
on foreign lending under control."
Next Generations of Americans. In the documentary I.O.U.S.A.
William Bonner, founder of Agora, Inc., says, "That one generation
can spend the money of the next is not just immoral...it's fundamentally
wrong and mean." Unfortunately, our government and the current
generations have no choice but to be wrong and mean.
of reckless spending in government and even in our own households
have finally caught up with us," says Wiggin. "And we've
dug such a hole that it is unlikely we can have these economic troubles
tidied up any time soon. What's scary is that with those troubles
come other problems. The nation's security will be at risk, and
it's likely that the levels of crime and poverty in future generations
will increase. Because we are a wealthy nation, we can spend more
than we take in for a very long time. But if we do it for too long
and our debt service becomes a problem, there's a big chance that,
in the words of Warren Buffett, 'demagogues will come along and
do some very foolish things.'"
and EZ American Way of Life. For too long the American way of life
has been funded by credit cards and ill-advised loans and propped
up by little to no savings. In fact, 2005 and 2006 saw negative
national savings rates. The last time we saw back-to-back negative
savings rates was in 1933-34 during the depths of the Great Depression.
years of historically low interest rates, America is dependent on
ready sources of cheap and easy credit," says Wiggin. "Unfortunately,
too many people used cheap and easy credit to buy things they couldn't
afford. That 'spend now, save never' mentality is what led to the
subprime mortgage bubble and collapse. For the bailout to work,
Americans must rediscover their sense of rugged individualism. We
must be more realistic in terms of what we can and can't afford.
We must start saving more. And we must demand that those leading
the nation are heeding this advice as well."
Programs. Many Americans rely on entitlement programs such
as Medicare, Medicaid, and Social Security. And while many baby
boomers and the generations following them have long been told they
won't be able to rely solely on Social Security in their retirement,
is it possible the current financial crisis and the nation's mismanaged
economy signal an end to these programs altogether? Wiggin says
all signs point to yes.
up his assessment is a study from the National Center for
Policy Analysis (NCPA) that suggests that without increases
in government revenues and reform of entitlement programs,
the following could happen:
By 2010, the federal government will stop doing 1 in 10
things it's doing now.
By 2020, the federal government will stop doing 1 in 4.
By 2030, the federal government will stop performing half
of the services it provides.
By 2050, Social Security, Medicare, and Medicaid will consume
nearly the entire federal budget.
By 2082, Medicare spending alone will consume nearly the
entire federal budget
"Entitlement programs are clearly in danger," says Wiggin.
"Baby boomers are getting older and putting more of a burden
on them. At the same time, healthcare costs are increasing, and
the economy is obviously incredibly shaky. If we don't figure out
how to better fund some of these programs, we are headed for major
problems down the road."
Dollar. The post bailout world has been surprisingly kind
to the dollar. In fact, the height of the Wall Street selling saw
the dollar index rally from a historic low of 71 to over 82. "The
dollar's reaction to this turmoil might be the only positive thing
to come of this disaster," says Wiggin. "It's an indication
that if we can get our act together, we can still be a strong global
economic leader. But first we must get our spending under control
both in government and as individual Americans. We are at a tipping
point with the dollar. If we get our act together, we can preserve
its importance in the global economy."
American Political Process. Without reforming the American
political process, solving our financial crisis and reducing the
debt load will be difficult. If the government mismanages the money
allocated in the bailout, our economic problems will increase exponentially.
The urgency with which the bailout plan was proposed and passed
is, according to Wiggin, politically dangerous.
plan was first presented as a three-page request for an exorbitant
amount of money to be given free of any oversight," he explains.
"That didn't fly with Congress. So, what they put together
was a 451-page legislative document that would still hand over an
exorbitant amount of money, but which now included the pork spending
that so many politicians revel in. So, the best thinking of those
in our government seems to be that to fix our broken economy we
need to spend money, mostly in the form of tax breaks, on industries
that produce children's wooden arrows, NASCAR race tracks, rum producers
in Puerto Rico and the Virgin Islands, and so forth.
conservatism is now an oxymoron in Washington, and without completely
revamping the way our government handles money, there is little
hope for us as a nation," adds Wiggin. "There is an enormous
opportunity for the next president to make dramatic improvements
in the finances of the government, which would be a 'legacy issue'
of his administration."
Americans feel like important decisions regarding the economy and
fiscal policy happen in some far-away place, by 'experts' in Washington
or on Wall Street," says Wiggin. "That's just not true.
And it's dangerous to think that way. You're abdicating your responsibility
to hold your government accountable. Congress needs to renew tough
budget controls like the PAYGO rules that expired in 2002. And take
additional steps to cut spending, finance the entitlement programs,
balance the budget, and start paying down debt.
their part, individuals need to save more, invest wisely, expect
less from the government, and be willing to pay for the services
they do expect," adds Wiggin. "They also need to educate
themselves about the tough economic challenges the country faces,
so they can both hold public officials accountable and give officials
the political permission they need to make the tough policy decisions
that are inevitable and on our doorstep."
Source: DeHart &
Note: A free
screening of I.O.U.S.A. will be held as part of the Detroit
Docs International Film Festival on Wednesday, October 29, 2008.
It begins at 7:00 p.m. at 1515 Broadway in Downtown Detroit.