Wednesday, August 26, 2009

“Will You Still Need Me, Will You Still Feed Me When I’m 64?”

If our kids have any money left over after paying taxes for the interest on the national debt, maybe they will.

We want to be positive about things so let's put it this way: ‘We can do better than this, all you Boomers out there!’

And if we don't, our children might not feed us in our dotage as Paul McCartney so eloquently asked in his great song.

We, the Baby-Boomers born post-World War II from 1946- 1964, the most idealistic, ideologically-separated generation in America since the Transcendentalists pre-Civil War, have the chance to leave behind for our kids and grandkids either a clean campground or one filled with enormous debt.

Like the $20 trillion in projected debt the Obama Administration just announced this morning. People will complain and say that it is Obama's debt or Bush's debt. It is our collective debt; it reflects our conflicting desires to have it all now and not pay for it with current tax dollars and we have been doing it for the past 40 years.

Typical modern-day American attitude, isn't it?

Liberal or conservative, libertarian or independent. Pro-life, pro-choice, green or non-green. We all have a joint stake in leaving behind a better future than this massive debt that is now accumulating at an alarming rate.

It just isn’t right.

Now, it is true that we have lived with what many have considered to be outrageous amounts of debt from roughly 1965-on. When I went to work for Congressman Alex McMillan in 1985, we were trying to reduce the then-enormous $221 billion budget deficit on a $946 billion annual federal budget. The national debt was $1.5 trillion.

That was scary then, scary enough to make me run to Congress to 'fix it'. It only took 13 more years to actually see a balanced budget.

The economy was roughly $5 trillion in size in 1985. But GDP has almost tripled since then and is now about $14 trillion even with this nasty recession going on. So we have survived and even prospered as a Republic as the debt stepped up to $3.4 billion by the time President Clinton left office in 2001.

The Obama Administration started with a $9 trillion debt left by the Bush Administration and a republican Congress from 2001-2006 and a democratic Congress from 2007-on. And now with this announcement, we are staring at $20 trillion in debt by 2017 unless we make some radical modifications to our national spending spree.

We can handle certain amounts of national debt in this country. After all, we are still the United States of America, aren’t we? We will grow our way out of this, won’t we? We have lived pretty well with debt levels ranging from 25-35% of GDP for the past 3 decades now.

But being 'able' to grow with enormous debt loads doesn't mean we 'have' to do it. That would be like being able to drink a gallon of whiskey because you are 21 doesn't mean you have to do it, now does it?

Why put ourselves at too much risk? What happens if the interest rates on 10-year treasury bonds go to 10% as they did in 1979? 10-year treasury notes currently yield about 3.5%.

Going to $20 trillion in national debt is just too gigantic to ignore. That will be close to 100% of GDP and stay there for years and years. Even if the GDP doubles in size by 2017 to $28 trillion, that $20 trillion debt will represent 71% of GDP then. CBO estimates that the GDP in 2019 will be only be $23 trillion in nominal terms.

Here is the sobering truth of the matter: If we do get to $20 trillion in federal debt, it will take 200 years to get it paid back down to zero if it is paid back at $100 billion per year. At the very least, just getting it back down to around 35% of GDP, we will have to pay down perhaps $200 billion per year for at least 65 years, assuming we don’t keep adding to the debt burden.

We have always followed periods of high national debt by paying it down and allowing the economy to grow out of it. But in each of the previous cases, the national debt went sky-high when we were fighting wars of massive magnitudes to gain or preserve our freedom. This is not the case nowadays.

It is a reckless and careless path we are now embarked on as a nation. Since the generations that have come before the Boomers have failed to arrest its growth, we are the ones left standing with the means and the responsibility to do it on behalf of ourselves and our children.

So, Boomers, let us all resolve to continue to have our differences about abortion, global warming and all of the other issues we have been so compelled to argue about over these past 30 years. They are energizing, important and in some cases, entertaining to have as intellectual discourses go.

But the one thing we all have to band together and agree upon, right now, this second in this moment in time, is that we will not tolerate the expansion of our federal debt to the $20 trillion level as lodged in current economic projections.

We can do better. We have to. It is that simple.

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