We Live in a Bankrupt Country

This is not my piece, but it's so important that I'm just posting it here in case someone stumbles upon it. Read on...

---

The Math is Simple - The USA is Bankrupt

The United States is functionally bankrupt. Our collective capacity to deal with this astonishing fact is seemingly nonexistent. Our national politics have become show business, exhibiting a complete refusal to strategically respond to this reality.

Let's look at the simple numbers of our national debt. Our on-the-books national debt is $11.6 trillion. But off-the-books federal debt, including Medicare and Social Security, is $107 trillion. This is not a made-up number; this is the money we should have in the bank, according to the federal government's own accountants, to pay for our current promises to our retirees and future retirees, and this doesn't include unfunded obligations that we have to the pensions and benefits promised to federal workers and veterans. Nor does it include huge unfunded pension and benefit obligations for other public employees at levels below the federal government.

But let's just add the $11 trillion to the $107 trillion, and we get $118 trillion. These are big numbers but still just fifth-grade math. Now our total annual national output, or gross domestic product (GDP), is about $14.3 trillion. Total federal receipts, or income if stated in business terms, are about $2.5 trillion. This means that our debt to federal income ratio is about 47, and that ratio assumes that the federal revenues are free to retire the obligations, which they are not. We must pay for defense and a myriad of other programs. Again, in business terms, there is no free cash flow to pay these massive obligations.

Our total national private net worth, according to the Federal Reserve Board, is about $51.5 trillion. That means our federal unfunded liabilities represent 2.3 times our collective net worth. That's pretty darn broke.

Ask any accountant, banker, or anyone remotely familiar with simple accounting knowledge if we can service this debt, and the collective answer is a resounding "no." Any business with these ratios would be a complete basket case, hopelessly bankrupt. Unlike General Motors Corp., there is no one with the wherewithal to bail out the USA.

If anyone can write an intelligent response to how we can handle this massive problem, please respond. I would love to see the plan. I once asked one of my federal senators, Sen. Tom Harkin, Iowa Democrat, how we would handle this nightmare, and he simply replied, "We'll grow our way out of this."

Senator, I challenge you to lay out this cheery scenario. We are not politically set up to grow at 8 percent or 9 percent like China. We would have to adopt extremely aggressive pro-growth policies, and those are not politically acceptable at this time.

Even if we significantly slash the federal entitlements by half, we cannot fix this problem. Even if we increase federal receipts from the 50 year average of 18.5 percent of GDP to say 27 percent, killing private-sector growth, we cannot fix the problem.

We are collectively broke. It is a horrible legacy we are leaving to our children.

Can common sense be restored?

— Mike Whalen, The Washington Times, August 11, 2009, p. A19

Mike Whalen is founder, president and chief executive officer of Heart of America Restaurants and Inns and is policy chairman at the National Center for Policy Analysis. An honors graduate of the University of Illinois and Harvard Law School, Whalen and his wife Kim have two children, Christopher and Katie, and reside in Bettendorf, IA.

Our friends Dwight & Joanne Tomkins are missionaries in Tegucigalpa, Honduras. I have copied part of their most recent mission report below, as it gives a first-person view of the political situation there, most specifically with respect to the so-called coup d'état (actually a perfectly legal congressional action) that occurred near the end of June.

Politics in Honduras

2009 August 17

In spite of what you hear and read on the news, we are not in any danger here. On July 29 Joanne even arrived at the Tegucigalpa airport, got a cab to the bus station with all of her luggage and bused out to Catacamas by herself with no fear or concerns.

And the current government is not a "brutal dictatorship", as one US newspaper reported last week. For the most part, things are going as usual. That's not to say there aren't a lot of angry people, but there are more accepting people than there are angry folks. The protesters are in the minority, and are pretty much concentrating their protests to Tegucigalpa (the capitol) and San Pedro Sula (which is considered to be the economic center of Honduras).

The previous leader was removed from office through a legal vote of the Congress because of his own illegal actions. The vote was ordered by the Judicial system, approved by the Congress, and carried out by the military. The current president was chosen by Congress in accord with the Honduran Constitution. The Vice-President had resigned previously and the president of the Congress was next in the line of succession. All of those government entities are still carrying out the same roles they did previously.

The hardest thing about the current situation, for us anyway, is the restricted travel caused by road blocks and check points. Military check points throughout the country are making travel much more time consuming. Also there still are intermittent road blocks on some of the roads by supporters of the previous president. We planned to take our truck down to the dealership in Tegucigalpa last Tuesday for it's annual check-up but were advised against it by the Embassy's report of anticipated demonstrations that day.

Dwight & Joanne Tomkins

It's not "Health" insurance

It's not health insurance. No one can buy a policy that ensures that you will be healthy. That's up to your own decisions about your lifestyle. The choices you make in what you eat, drink, exercise (or don't), how you drive, the risks you take in your leisure time, the riskiness of the job you do.

The insurance you pay for is mostly to spread the cost out over many years for one or two catastrophic incidents that might cost you more than you could possibly afford at the time. But the economics of it are very simple: the many pay for the catastrophies of the few. And we especially pay for the boneheads who take the greatest risks. But in the end, YOU are paying for it. It doesn't matter if the money comes from the insurance company or the government or the local charity, you are the one footing the bill (unless of course you refuse to ever support any charity, but you're still paying for 99% of it).

I was recently asked how this was different from having the government issue tickets and fines for driving infractions. Huh? The argument is that the government makes rules about driving and then enforces those rules, so why can't they make rules about "health insurance" and enforce those? The answer is enlightening:

When you get a ticket for speeding, you pay the price of your poor decision. If you kill someone because you are speeding, your price may be very high indeed, and cost you much of your worth and much of your time if you are incarcerated. So the government has, in this case, punished you for your poor decision. And in the case of a lawsuit for a wrongful death, the family of those killed may even benefit financially from your wrongdoing.

If you get sick, you have a lot of choices, including taking care of yourself, and if that is not sufficient, seeing a doctor or even receiving hospital care, etc. You pay for this privilege, whether directly or through the regular insurance premiums you pay (perhaps for most of your life!). But if you've made poor decisions throughout your life, your health may be comprimised because you chose to smoke, or chose to eat poorly, or chose to forgo exercise in order to spend more time watching your nightly TV or get your daily internet fix. You may frequent establishments in less-than-desirable parts of town, or you may talk on your phone or send text messages while driving. It may be more subtle that these; perhaps you simply chose to associate with people who guided (or misguided) you into less-than-healthy choices. But the point is that all of these are choices.

(Please note that yes, there are many health problems that are not entirely due to poor choices, especially inherited or congenital problems. But these are the minority, and fall under a different category.)

Now, when you are called to pay the piper for your lifetime of poor choices, the medical bills may be very high. So if you've been blessed to have medical insurance, you may have already paid for much of the care that you will receive. If not, you will be faced with a decision of how to pay, or to instead forgo the expensive part of the available care.

If "health care" becomes an entitlement (you may say that it already has), then who pays for the poor choices made by those without their own insurance? Yep, you know the answer. We all do. And it's been tried over and over in many places all over the world, and it doesn't work. Well, it does on the surface, but in reality it's an overall failure.

Summary: For government-enforced driving infractions, the person who makes the poor choices pays the penalty. For government-enforced "health care", the person who makes the GOOD choices pays the penalty, and those who make the poor choices get the supposed benefit. That's how it's different.