In a surprise move, the co-chairs of Barack Obama’s national debt commission released their preliminary proposals to the media on Wednesday.The proposals are actually quite modest – they recommend that nothing be implemented until 2012 because of the weak economy, and their plan would not balance the federal budget until 2037 – but almost as soon as it was released Democrats and Republicans both started screaming bloody murder about how they would not support it.
See the complete austerity plan here >
The truth is that virtually none of our politicians are willing to make the hard choices that would be necessary to get the national debt under control. Today, the U.S. national debt is rapidly approaching 14 trillion dollars and it is growing at an exponential rate. It is the single largest debt in the history of the world, and it has increased in size for 53 years in a row. It would be very difficult to understate the true horror of the debt that the U.S. federal government has accumulated. So what is the solution? As you will see below, there isn’t one. In fact, it will be an absolute miracle if our leaders are able to even slow down the rate at which the debt is growing in the years ahead.
The deficit reduction plan put forward by Erskine Bowles, a former White House chief of staff under Bill Clinton, and Alan Simpson, a former Republican Senator from Wyoming does not even have support from the rest of Barack Obama’s national debt commission. There is no way that either most Democrats or most Republicans in Congress will ever accept it. But at least the Bowles-Simpson plan is making headlines around the world and has brought the national debt back to the centre of the political debate in this country.
In some ways, the Bowles-Simpson plan is a complete and total fantasy. For example, it assumes that the U.S. economy is going to fully recover and will experience solid growth for many years to come. That simply is not going to happen. The prosperity of the last couple of decades has been fuelled by the biggest debt bubble in the history of the world, and there is no way that is going to continue. At some point the U.S. economy is going to fall apart like a house of cards.
But even if the U.S. economy could magically meet the projections contained in the Bowles-Simpson plan, it still contains a whole host of “poison pills” which make it completely and totally unacceptable to both political parties….
*The plan calls for deep cuts to U.S. military spending. The Republicans will never go for that.
*The plan reduces Social Security benefits to most retirees in future decades. The Democrats will never go for that.
*The plan raises the Social Security payroll tax cap to $190,000. The Republicans will never go for that.
*The plan envisions a very slow rise in the retirement age from 67 to 68 by 2050 and finally to 69 by 2075. The Democrats will never go for that.
*The plan includes a “less generous” annual cost-of-living adjustment for Social Security benefits. Considering the fact that Social Security benefits are already not going to see an increase this upcoming year, this proposal is likely to upset a large number of seniors.
*The plan calls for the federal tax on gasoline to approximately double by 2015. The Republicans would never go for that, and if that was ever implemented it would have a very serious negative impact on the economy.
*The plan would eliminate the deductibility of mortgage interest payments. Millions upon millions of homeowners would be absolutely furious.
*The plan would tax health benefits provided by employers. That would make millions of people very angry.
*The plan also calls for huge cuts in farm subsidies. There are a lot less farmers than there used to be, but that would still be extremely unpopular.
But the truth is that hard choices need to be made. The national debt is spinning wildly out of control. The U.S. government is essentially bankrupt.
Unfortunately, the majority of the federal budget is made up of entitlement programs. Entitlement programs are not subject to budget freezes or budget cuts – unless Congress changes the underlying laws. But any change to major entitlement programs would potentially upset millions of voters.
Not that there are not other areas that could be cut. Today, the average federal worker earns far more than the average private sector worker. In fact, wages for federal workers have been escalating at a frightening pace. In 2005, 7420 federal employees were making $150,000 or more per year. Today, 82,034 federal employees are making $150,000 or more per year. That is more than a tenfold increase in just five years.
But any major cuts to federal spending are going to really upset a lot of voters, and our politicians really, really like to get re-elected. The kinds of cuts that are really needed will never get through the Democrats in Congress and the Republicans in Congress and signed into law by Barack Obama. There are just way too many things that both major political parties consider to be “untouchable”.
Meanwhile, the U.S. government debt continues to explode. The debt is already so big, interest on that debt is scheduled to escalate so dramatically, and we have made so many unsustainable promises regarding Social Security and Medicare that it is basically impossible to balance the federal budget at this point. If serious attempts were actually made to balance the budget in 2011, it would likely create a financial panic, and suddenly sucking over a trillion dollars in federal spending out of the system would crash the economy.
The following are 14 facts that reveal just how obscene the U.S. national debt has become, and why it is now basically impossible to balance the budget of the U.S. government at this point….
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