Our looming crisis

I made a big mistake today. I read an article in Fortune magazine about a looming crisis – America’s debt. At first I thought the worry was about the current Obama-led spending, but it is much, much worse than that. We are facing what the magazine calls a “crushing burden of debt” that gets so big that we are overwhelmed.

The problem is due to policies that are ongoing. Thanks to all the entitlements, especially Social Security and Medicare that will soar as all of the baby boomers retire,the trend of more outlays than revenues will become far worse even after the stimulus spending winds down and the economy recovers. The timewhen all of this will become obvious is not all that far off in the future—2020, according to financial experts. The Government Accountability Office estimates that interest payments will take up nearly one-third of all revenues by 2040 with entitlements eating up the rest of the income. That means there’s nothing for defense, education, veterans benefits, or any of the other federal programs.

Why is this? Money coming into the government is mostly due to the personal income tax, which does not always rise thanks to economic downturns. However, future spending comes about mostly by entitlements, which the magazine says are “programmed to rise far faster than national income.”

What’s the fix? Fortune says bumping up the income tax won’t solve the problem because it would become too burdensome. The writer suggests the use of a VAT(value-added tax) will become a political reality because it can be used as a federal sales tax, allowing the government to collect money on all sorts of purchases. There’s a huge downside to do this because such attacks lands hard on metal and low income earners, who are forced to use a big part of their income to buy things.

So go ahead and complain about Obama economic programs. I’m not a fan of such large expenditures either. But don’t think that things will be OK in a year or two whenhe tells us the economy is recovering and he is putting less money into stimulus programs. This will not fix the mess we are in.

Do some research. Join groups that you think will help work to solve these budget problems. Monitor politicians and their spending habits. If the problem seems like a long way off, think about that year of 2020 when the largest number of baby boomers retire, sending Social Security and Medicare through the roof. If we want to save America as we know it for our children, we are running out of time.