Shane Rosenthal: Forgive Us Our Debts

Chris —  December 5, 2012 — Leave a comment

If you watch the Peter Schiff clip, you will want to buy his books. (I haven’t read anything  by him yet).

Chris Cox and Bill Archer have written an unsettling piece for the Wall Street Journal about the sobering reality of the US Debt. Though some may be familiar with the $16 trillion figure, there are few who realize that this is actually just the tip of the iceberg. According to the article, the true number is actually closer to $86 trillion (which amounts to 550% of our GDP).

Cox and Archer argue that the government has gotten away with underestimating the actual price of our national debt since it has not needed to furnish the kind of financial documentation required of most businesses. “The actual figures,” they write, “do not appear in black and white on any balance sheet.” While the U.S. Treasury “does list liabilities such as Treasury debt issued to the public, federal employee pensions, and post-retirement health benefits…it does not include the unfunded liabilities of Medicare, Social Security and other outsized and very real obligations.”

The problem is that all the revenue collected for these particular entitlement programs is not actually being saved for the future, but is being paid out to current retirees. And this will all fall apart when more and more of our nation’s baby boomers start collecting retirement benefits. The government is currently borrowing 1 out of every 3 dollars that it spends, so what will we do when the majority of the boomers are retired? According to the authors, “Borrowing at this scale could eclipse the capacity of global capital markets–and bankrupt not only the programs themselves but the entire federal government.”

Peter Schiff, an American economist who won my respect after correctly predicting the ’08 housing bubble crisis and ensuing recession (check out “Peter Schiff was right” on YouTube), has written in his most recent book that politicians from both parties do not have the courage or will to face this issue squarely. And so he argues that our representatives will most likely continue to underemphasize the magnitude of this problem year after year until eventually the entire system collapses.

The rest here.

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