Steve Skojec

The tax rebates are coming, the tax rebates are coming!

The big question is: “From where?”

The big answer is: “Probably from China.”

 Why? China has a huge trade surplus with the United States. A $1.6 trillon surplus. Since I’m no economist, I rely on other sources to help me figure out this stuff. And according to some sources, China is keeping this money largely in the U.S. by buying treasury notes. Since treasury notes are what we sell to finance our debt, this means that China is buying our debt, and lots of it.

So to create a $150-billion-plus economic “stimulus package”, our government - already in debt by the trillions - is having to borrow more money. If I’m understanding this correctly, that will mean more treasury notes will be sold to places like China. Now remember that China - already lending us the money we’re burning like tinder - is getting it all back in that huge trade surplus since just about everything in this country is made in - you guessed it - China.

Including, depending on how you look at it, this “stimulous package”. Which of course we’ll go on to spend on more Chinese-made goods. (For a quick synthesis on the China angle, see Glenn Beck’s take.)

Because of behavior like this, the untenable welfare/social security/medicare system, an out-of-control foreign policy, etc., the United States is saddled with an astronomical debt. There’s $9.2 trillion on the books, but there’s some tricky accounting going on. The debt we talk about in the U.S. of A. is, as I understand it, our cash debt. We have a cashflow problem, and we owe money to people for things going on today. But what our government doesn’t report in its financial figures is the cost of future liabilites - the promises we’ve made to pay going forward. Think of it as a credit card purchase. Just because you bought that Rolex today and the bill hasn’t come yet doesn’t mean you don’t owe the money.

According to the 2007 U.S. Financial Report, here’s Government Accountability Office’s included memo that tries to give the lowdown on the unaccounted for future liabilities:

Fiscal year 2007 marked the second year in which the Statement of Social Insurance has been presented as a basic financial statement. As noted above, this year, we were able to render an unqualified opinion on the 2007 Statement of Social Insurance. This is a significant accomplishment for the federal government. This statement shows that projected scheduled benefits exceed earmarked revenues by approximately $41 trillion in present value terms for the next 75-year period.

Considering this projected gap in social insurance, in addition to reported liabilities (e.g., debt held by the public and federal employee and veterans benefits payable) and other implicit commitments and contingencies that the federal government has pledged to support, the federal government’s fiscal exposures totaled approximately $53 trillion as of September 30, 2007, up more than $2 trillion from September 30, 2006, and an increase of more than $32 trillion from about $20 trillion as of September 30, 2000.

This translates into a current burden of about $175,000 per American or approximately $455,000 per American household.  (page 33)

This is wildly unsustainable. At some point, this money HAS TO BE PAID BACK. And we, the American people, are the ones holding the bag. Here’s another treat from the 2007 U.S. Financial report:

Unsustainable Debt

As noted earlier, the Government must borrow from the public to finance any gaps between expenditures and revenues. Increased borrowing leads to higher debt service (net interest) which in turn can make it more difficult to balance expenditures and revenues in the future. Chart J shows that by 2030, public debt is projected to rise to 68 percent of GDP, surpassing the non-wartime peak of 49 percent in 1993. By 2040, public debt is projected to be 128 percent of GDP, well above the World War II peak of 109 percent, and by 2080, debt is projected to approach 600 percent of GDP.

At some point before the debt reaches such unprecedented levels, the world’s financial markets would likely cease lending to the United States. Although the precise point at which this would occur is unknown, these projected debt levels cannot be sustained indefinitely. Many economists believe that persistent debt/GDP levels over 100% are unhealthy. The U.S. is projected to surpass that mark within the next 30 years, with the debt/GDP ratio at that point on a continually and dramatically rising trajectory (more than 10 percentage points per decade through 2080). Avoiding the catastrophic consequences of this fiscal path will require action to bring program expenditures in line with available resources. How soon those actions are taken will greatly influence their ultimate impact on the Nation. (page 19)

Did you notice anything off about these two paragraphs? Maybe the idea that we’re fast approaching a debt that’s 600 TIMES THE GROSS DOMESTIC PRODUCT OF THE WEALTHIEST NATION ON EARTH? How about the fact that the financial report itself characterizes the consequences of this trend as “CATASTROPHIC”?

This is why real conservatives can lend an ear to a guy like Ron Paul. Some think he’s crazy, but he’s talking sense about our economic crisis. It’s not made up, it’s just really difficult to understand.

For many (if not most) pro-lifers, economics has always weighed well below the abortion issue on the policy priority list when evaluating Presidential candidates. We are reaching a point, however, where the economic issues facing our nation are becoming a grave moral concern. What happens when we run out of money? When foreign countries dump our currency? When the dollar completely tanks? When unemployment soars?

Ever heard of the Weimar Republic? That period of post World War I Germany where inflation had spiralled so far out of control that the German Mark, which had an exchange rate of 4.2 to the American Dollar in 1914 had reached an unfathomable low of 2 TRILLION marks to the dollar by 1923? People were bringing cash to the store by the wheelbarrow full to buy things like a loaf of bread.  Nearly 1,800 government printing presses were running around the clock just to produce enough cash. (For more on this aspect of Weimar Germany, go here.)

What had precipitated this massive decline? A huge war debt, financed only partially by taxes. The bulk was paid for by loans, the sale of treasury bills, and an increased monetary supply. 

 Sound familiar?

We need to get this country’s spending under control. We are making ourselves vulnerable in so many ways. Economic crisis leads to real suffering - extreme poverty, starvation, loss of life - and the kind of instability that rising foreign powers like China can exploit.

It’s not going to happen in the next four years. This Presidential race - not full of great choices to start with - has left us with three liberals to choose from. They want to spend more, not less. They have no concept of fiscal responsibility. (Neither does Mike Huckabee, for you hangers-on).

We’re in trouble, America. The first step is facing up to the truth. If we can make that happen, we’ll have to hope we can go forward from there -  if there’s still time.