BY Jim Taylor
I hate to be the one to tell you this, but: As I will inform you, the National Debt is extremely important, but is not the biggest indicator of our national burden of financial obligation(s).
The ND is what our government already has borrowed to cover the shortfall which was too large to cover by collecting taxes.
I have always pointed out the dangers of excessive debt, either public or private.
The government can borrow only if there are creditors willing to loan us money by buying U.S. Treasury notes or other government securities.
The alternative to borrowing to pay this debt is to devalue our currency to pay off the debt with less valuable currency.
This alternative makes everyone paid with or holding dollars much poorer, and most of all those already poor. Holding gold presently reduces this risk, but government could outlaw gold holding.
The Trump administration has not indicated any plan to reduce debt to a sustainable level, thus we can expect creditors to be less likely to buy U.S. government debt/treasury’s. This is a significant factor in pushing interest rates higher.
Traditionally the ND has been 55 percent or less of the GDP; prior to the housing bubble recession (started in 2009), the ND was already at 62.8 percent of GDP; ending 2016 it was 104.8 percent of GDP or double its traditional long term level.
Foreigners now (especially China and Japan) lead the world in selling off U.S. treasuries for fear of a dollar collapse.
The true indicator of total National Financial Obligations is Mandatory Legislated Spending plus the National Debt. Mandatory Legislated Spending includes Social Security payments, Medicare, Medicaid, Food Aid/stamps, etc., and all other forms of welfare (Social Security is welfare because it comes from younger people’s income paid to the elderly or disabled).
A large portion (almost 100 percent) of Mandatory Legislated Spending is UNFUNDED.The ND is only about $20 trillion, while the unfunded mandates are almost incalculable, but considerably over $100 Trillion.
The real Total National Indebtedness is not payable in today’s dollars. There is no solution for the total National Obligation which most of you would accept. There will eventually be much “weeping and gnashing of teeth.”
I can only hope to be in my grave before “it hits the fan.”
Jim Taylor is a local resident and regularly writes to the VMS.