Mark Steyn is brilliant—and grim
Mark Steyn, writing in Investors Business Daily, isn’t pulling any punches about what the near future holds for us if the Federal government keeps spending like there is no tomorrow. There won’t be.
[B]y 2020 just the interest payments on the debt will be larger than the U.S. military budget. That’s not paying down the debt, but merely staying current on the servicing — like when you get your MasterCard statement and you can’t afford to pay off any of what you borrowed but you can just about cover the monthly interest charge.
Except in this case the interest charge for U.S. taxpayers will be greater than the military budgets of China, Britain, France, Russia, Japan, Germany, Saudi Arabia, India, Italy, South Korea, Brazil, Canada, Australia, Spain, Turkey and Israel combined.
When interest payments consume about 20% of federal revenues, that means a fifth of your taxes are entirely wasted. Pious celebrities often simper that they’d be willing to pay more in taxes for better government services.
But a fifth of what you pay won’t be going to government services at all, unless by "government services" you mean the People’s Liberation Army of China, which will be entirely funded by U.S. taxpayers by about 2015…
And even those numbers presuppose interest rates will remain at their present historic low. Last week, the firm of Macroeconomic Advisors, one of the Obama administration’s favorite economic analysts, predicted that interest rates on 10-year U.S. Treasury notes would be just shy of 9% by 2021. If that number is right, there are two possibilities:
The Chinese will be able to quintuple the size of their armed forces and stick us with the tab. Or we’ll be living in a Mad Max theme park. I’d bet on the latter myself.
And we all know who’ll be running Bartertown.
Look, there’s no way to sugar-coat this. What’s coming isn’t gonna be pretty. Too many politically powerful groups have their fingers stuck too deeply into the DC pie to let it all just slip away without fighting tooth and nail. There are too many people who believe the gravy train of benefits coming out of DC should be endless to kiss that goodbye without a fight.
Look at what has been happening in Greece. They’ve built up two generations of people who cannot and will not accept that they’re simply out of money. Despite the fact that system has been thoroughly looted, they are adamant that the looting should continue.
If we don’t cut spending—and I mean real cuts, not cuts to some imaginary baseline that has $9 trillion is spending increases baked in—and some sort of serious tax reform that widens the tax base to raise more revenue, we’re done.
And don’t come back at me with some lame "Our GDP:Debt ratio was 120% at the end of WWII" silliness. Yes it was. And you know how we fixed it? We cut Federal spending from $92 billion in 1945 to $38 billion in 1949. For 2011, 40% of the federal budget was financed with borrowed money: We’ll spend $3.818 trillion, of which $1.645 trillion is borrowed. If we funded only defense, Medicare/Medicaid, and Social Security, and interest on the debt, we’d still have a deficit of $673 billion. Just to balance the budget this year—forget paying off any debt—we’d have to cut an additional ~25% from Health, Defense, and Pensions. Follow the link and download the CSV file, open it up in Excel, and run the numbers yourself. The magic number to balance the budget this year is the revenue of $2.174 trillion.
There’s no big mystery as to why we got a downgrade from S&P. The mystery is why Fitch and Moody’s haven’t downgraded US debt yet.
To begin paying down the debt will require massive cuts in government spending, substantially widening the tax base, and some healthy economic growth—and good luck with that as we add another couple hundred k government workers to the unemployment roles, lay off 1/3 of government contractors to boot, and start asking the bottom 50% of taxpayers to actually, you know, pay taxes, along with everyone else.
If you’re under 50, and reach retirement age with any modicum of personal wealth, you can forget seeing a dime in Social Security or Medicare benefits when you retire. You’ll be means-tested right out of all that.
You think the debt ceiling battle was disruptive? Well, hold on to your hats, folks.