Posted on 31 August 2010
In Politico on Wednesday, August 30th, former Congressional Budget Office director Douglas Holtz-Eakin and Cameron Smith wrote the following about a Value Added Tax (VAT):
“The deficit problem is excessive spending — not inadequate revenues. (…) Adopting a VAT could add insult to injury and exacerbate the spending problem. Raising taxes of any sort might relieve Congress of financial market pressure to get its house in order. Unfortunately, this would quickly be undone because of rising federal spending.”
Read the whole thing here.
Posted on 27 August 2010
In an interview on August 25th, 2010, a top executive at the well-known credit rating agency Standard & Poor (S&P) gave a stern warning to Congress: pay attention to the recommendations of the President’s debt commission–or else.
You see, right now the US has a credit rating of AAA; that’s a bit like having a perfect personal credit score (aka FICO score) of 800.
But–just like your credit card company would be worried if you charged 10 new flat screen TVs and didn’t pay the bill–credit rating companies like S&P and Moody’s have become increasingly uneasy with the US government’s balance sheet.
It’s not difficult to understand why: The federal government is currently accumulating over $1 million in new debt every 30 seconds. In the time it takes you to read this news update, another $4 million will be added to the country’s debt.
The situation gets even worse in the future. As the above chart demonstrates, the amount of money the government has to spend is growing far more slowly than the rate at which Congress is spending it. The consequence: a shocking $674 trillion national debt awaits the US at the end of that chart.
This disastrous spending path is the reason why both S&P and Moody’s have warned us multiple times to get our fiscal house in order.
If we fail to do so, the consequences for you and your family couldn’t be more serious: money in the bank and savings will be worth less; take home pay will be lower because of higher taxes; and promised benefits will be slashed as the glide path of entitlement reform becomes a cliff (Click here to learn more about the personal consequences of the debt).
Posted on 12 August 2010
The United States is bankrupt.
That’s the provocative thesis from an economics professor at Boston University. He cites as proof a recent report that the US government needs double the funds it currently has on hand to cover all the spending promised to future generations.
That might sound a bit confusing, so think of it in personal terms.
We all make plans for future spending–perhaps for our children’s college education, or for our retirements. But no one would suggest that the time to start saving is the day you turn 65, or the first day of college. Financial planners advise that you start saving now based on your anticipated future expenses.
Unfortunately, our representatives in Washington have ignored that advice. Congress has made plenty of costly promises to future generations–most recently, through the new health care law–without considering how they’ll pay for them.
We’re on track to fall far short of making good on our IOUs when they come due. Yet instead of cutting back, Congress continues to spend and accumulate debt at an incredible pace: $1 million every 30 seconds. Much of that money is owed to foreign governments like China and Saudi Arabia.
What’s the solution? For starters, acknowledge that we can’t borrow or tax our way out this pickle. Our debt is already on track to exceed $26 trillion in the next ten years, and there are serious consequences to accumulating debt of this magnitude.
And–according to the economist above–defeating this debt with higher taxes would require doubling everyone’s taxes right now and keeping them high indefinitely into the future. (See why else higher taxes won’t work).
There’s an old saying: If you find yourself in a hole, the first thing to do is stop digging. That’s exactly what the big spenders in Congress need to do: STOP.
Posted on 03 August 2010
Last week was a nail-biter for anyone concerned about the consequences of our rapidly increasing national debt (If you’re not concerned, click here to find out why you should be).
- First, the President’s Office of Management and Budget released updated budget numbers (pdf) projecting a record $1.47 trillion deficit for 2010. That means our government has enough money in 2010 to pay for entitlement programs (like Social Security and Medicare) and interest on the debt. Everything else – from transportation to education, from homeland security to NASA – is going on the nation’s credit card.
- Next, the Congressional Budget Office released an analysis (pdf) warning of a sudden and devastating financial crisis that could be caused by our mounting debt. Their stern warning to big-spenders in Congress: “…the higher the debt, the greater the risk of such a crisis.”
- Finally, a top analyst for Moody’s – a prominent credit rating agency – warned the United States that it needs to spell out a plan to reduce its national debt. Otherwise, Moody’s could lower our credit rating, an event whose consequences will ripple throughout the economy and impact everyone (think: hundreds of dollars added to your monthly mortgage payment).
Despite these dire warnings, our national debt is still on track to double from $13 trillion to $26 trillion in the next ten years.
If you’re not paying attention, you need to be. Find out more about how the debt affects your family, then click the Take Action button on the banner above.