Avoiding "the global equivalent of a store clerk seizing your credit card and cutting it up"

A Proposed Diet for the U.S. Budget

Excerpt:

On paper, the government’s total assets, including facilities and inventory, are valued by the authors at about $1.4 trillion. If the government had to submit a standard financial statement of the type required of the average home buyer, it would show a negative net worth of $7.6 trillion.

Mr. Bittle and Ms. Johnson predict that even with continued foreign investment and financial forbearance, the nation may soon find it impossible to fulfill its existing and future commitments to its own citizens in the form of Social Security and Medicare payments. In 2006, Social Security, Medicare and Medicaid consumed 39.7 percent of the federal budget of $2.6 trillion, compared with 19.7 percent for defense.

In the future, the cost of entitlement programs will balloon as 78 million baby boomers age. In 2006, there were fewer than 50 million Social Security recipients; 12 years from now, there will be nearly 70 million. With health care costs rising faster than inflation, the part of Medicare that covers hospital costs for the elderly is already paying out more than it takes in from payroll taxes.

“Unless something changes, we could see a time (around 2040, if nothing is done) when nearly every tax dollar collected will be needed to pay for retirement and health care for the elderly and interest on the debt,” the authors warn. “There will be almost no money for anything else, except maybe a basic national defense.”

Comment: Sobering fiscal reality!