Dan McLaughlin

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To Home Page Latest Newsletter Column Archives Click to get these columns for your local paper	© 2006 Daniel J. McLaughlin Paying the Piper The successful operation of any enterprise requires that the owners or trustees of the organization know how they are really doing in order to make wise decisions. The government of the United States is no exception. The words of Thomas Jefferson in 1802 are quoted in the Executive Summary of the 2006 Financial Report of the United States Government: “We might hope to see the finances of the Union as clear and intelligible as a merchant’s books so that every member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them.” How well have we heeded Mr. Jefferson? While more comprehensive financial reporting is now required, and gives a much better picture of the country’s finances, the picture is far from complete. The official national debt is nearly $8,600,000,000,000, that is 8.6 trillion dollars, a staggering number by itself. With the current deficits, we are adding about a billion dollars every day. But even that is not the entire debt. The government is obligated to pay massive future unfunded social insurance benefits. They are real liabilities to real people. According to a report by the Government Accountability Office (GAO), the present value of the liabilities is an additional $44 trillion, not recorded on the government books. Together with the official debt, the total fiscal burden on US citizens is 51.1 trillion dollars. To put it in perspective, that is a debt exceeding $411,000 per household. Those figures caught the attention of the Comptroller General of the United States, David Walker. As the head of the government oversight body, he is trying to make a point about the critical nature of the situation. Since September of 2005, he has been on a Fiscal Wakeup Tour. The purpose of the tour is to demonstrate the seriousness of the problem and to make it a major issue for the 2008 elections. He has a recorded address to the public on the GAO website. The problem of the debt is bigger than either major political party, and both parties share the blame. The problem is the same one that the Soviet Union faced, and died under the weight of. Socialist programs have to be paid for. The issue is not just about social security reform. Medicare entitlements account for much of the staggering growth in unfunded liabilities of recent years. Since the year 2000, liabilities from Medicare A, B and D rose from $9 trillion to $29 trillion. The waves of aging baby boomers will hit in a few short years, expecting to cash in their chips. With nothing but IOU’s to give them, the only way to pay will be devastating tax levels, serious inflation or even default and bankruptcy. The citizens will suffer under any choice. Some think that the country can grow out of the problem with the right incentives and policies. However, according the GAO, Gross Domestic Product would have to grow in the double digits for the next 75 years to pay for all of the benefits accruing. Even during the good years of the 1990’s, real GDP grew by an average of only 3.2% per year. It is profoundly unrealistic to believe that economic growth is the answer. The point of Mr. Walker’s tour is that the expectations of the American people have to change regarding the role of government, and painful, unpopular decisions made. The country is on the road to disaster. Demographics have allowed us to ignore it. Those demographics will soon turn on us with a vengeance. Many see mankind’s ingenuity and the resilience of the free market as reasons that the problems can be avoided. I am also a believer in the power of the free market. It is the greatest power for good and progress that the world has known. As government grows, however, freedom necessarily diminishes. As freedom diminishes, the market loses it’s power. Increasing pressure causes more drastic intervention by government and the painful spiral down becomes more inevitable. Government is definitely growing, and the people have been seduced by the pied piper’s magical music of good intentions and free lunches. Eventually, someone will have to pay the piper. He has been playing and we have been following for far too long. Mr. Walker is a hero in our real life story, telling of disastrous consequences of something for nothing. Hopefully, this country can break the spell and heed his warning before we suffer the Soviets’ fate.
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Daniel Mclaughlin Copyright © 2006 [Daniel McLaughlin]. All rights reserved. Revised: 03/18/08

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Paying the Piper

The successful operation of any enterprise requires that the owners or trustees of the organization know how they are really doing in order to make wise decisions. The government of the United States is no exception.

The words of Thomas Jefferson in 1802 are quoted in the Executive Summary of the 2006 Financial Report of the United States Government: “We might hope to see the finances of the Union as clear and intelligible as a merchant’s books so that every member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them.”

How well have we heeded Mr. Jefferson? While more comprehensive financial reporting is now required, and gives a much better picture of the country’s finances, the picture is far from complete.

The official national debt is nearly $8,600,000,000,000, that is 8.6 trillion dollars, a staggering number by itself. With the current deficits, we are adding about a billion dollars every day. But even that is not the entire debt. The government is obligated to pay massive future unfunded social insurance benefits. They are real liabilities to real people. According to a report by the Government Accountability Office (GAO), the present value of the liabilities is an additional $44 trillion, not recorded on the government books. Together with the official debt, the total fiscal burden on US citizens is 51.1 trillion dollars. To put it in perspective, that is a debt exceeding $411,000 per household.

Those figures caught the attention of the Comptroller General of the United States, David Walker. As the head of the government oversight body, he is trying to make a point about the critical nature of the situation. Since September of 2005, he has been on a Fiscal Wakeup Tour. The purpose of the tour is to demonstrate the seriousness of the problem and to make it a major issue for the 2008 elections. He has a recorded address to the public on the GAO website.

The problem of the debt is bigger than either major political party, and both parties share the blame. The problem is the same one that the Soviet Union faced, and died under the weight of. Socialist programs have to be paid for.

The issue is not just about social security reform. Medicare entitlements account for much of the staggering growth in unfunded liabilities of recent years. Since the year 2000, liabilities from Medicare A, B and D rose from $9 trillion to $29 trillion. The waves of aging baby boomers will hit in a few short years, expecting to cash in their chips. With nothing but IOU’s to give them, the only way to pay will be devastating tax levels, serious inflation or even default and bankruptcy. The citizens will suffer under any choice.

Some think that the country can grow out of the problem with the right incentives and policies. However, according the GAO, Gross Domestic Product would have to grow in the double digits for the next 75 years to pay for all of the benefits accruing. Even during the good years of the 1990’s, real GDP grew by an average of only 3.2% per year. It is profoundly unrealistic to believe that economic growth is the answer.

The point of Mr. Walker’s tour is that the expectations of the American people have to change regarding the role of government, and painful, unpopular decisions made. The country is on the road to disaster. Demographics have allowed us to ignore it. Those demographics will soon turn on us with a vengeance.

Many see mankind’s ingenuity and the resilience of the free market as reasons that the problems can be avoided. I am also a believer in the power of the free market. It is the greatest power for good and progress that the world has known. As government grows, however, freedom necessarily diminishes. As freedom diminishes, the market loses it’s power. Increasing pressure causes more drastic intervention by government and the painful spiral down becomes more inevitable.

Government is definitely growing, and the people have been seduced by the pied piper’s magical music of good intentions and free lunches. Eventually, someone will have to pay the piper. He has been playing and we have been following for far too long. Mr. Walker is a hero in our real life story, telling of disastrous consequences of something for nothing. Hopefully, this country can break the spell and heed his warning before we suffer the Soviets’ fate.

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