In essence,the time is here for the Federal Government to file Chapter 7.Why not now?
Fact:the Federal Government is technically bankrupt right now.
Fact:the Treasury has no wealth,it simply redistributes funding,
Fact:currently,the Treasury spends more than it takes in thus the $10 trillion+ debt.
Fact:SS and Medicare trust funds have no real money,only IOU's from the Treasury.
Fact:this occurs because both funds currently run surpluses each year which is then used for
other purposes thus the IOU's are issued.
Fact:when you take the current debt and add-in the projected expenditures for entitlement
programs for the next 75 years,the total is over $50 trillion and counting.
Fact:unless taxes are substantially increased or spending dramatically cut,eventually all
incoming money to the Treasury will be spent on SS,Medicare and the debt interest.
Fact:this means no money left for any other programs including defense without changes.
I won't review the dollar details as they are available all over the web.However,the facts are undeniable.The Government is broke because we have a debt.It's getting worse because we annually have a deficit.Future SS and Medicare obligations will exceed funding coming in causing the Treasury to use General Fund monies to make up the difference.The interest on the debt will continue to accelerate.
If foreign investment were to stop or even slow substantially,the camels back would break.There are simply not enough domestic public investors or other Government Funds with investment capital available to support our massive deficit spending.We must have foreign investors.
Reviewing history shows that tax cuts can actually create a budget surplus due to corporate investment.However,can you imagine Congress keeping their hands off this money to dedicate it to paying down the debt?No more than imagining reduced spending to accomplish the same goal.So if we can't save the money or raise it to pay off the debt,what is left?Repudiation.
It's not at all without precedent.Just not on this scale.When you watch current trends in rapid debt growth,increased spending on infrastructure,defense,interest,etc.Add in the limitless wish list of global warming,cradle to grave entitlements and countless other special interests,no one can predict the limit to the debt.Can't pay it off,can't stop it from growing.Repudiation.
Of course,this amazingly complex scenario would require global cooperation of unprecedented scale.A wholesale change in fundamentals would have to occur at the same time to prevent re-occurrence.Balanced budget,massive Government program reductions and/or state takeovers of these programs,and re-writing the rules on Congressional Appropriations.Lawyer Heaven!
But it is unavoidable someday.Partisan squabbling guarantees it.No way does everybody get on the same page and stay there long enough to repair it without simply writing off the entire debt.More to come...