I think you have all heard that we now owe on the National Debit 13 trillion dollars. Do you have any idea how much that really is? I didn't think so. How many zeros are there after the 13? It is 12 zeros. How many legal citizens are there in the USA? Just over 300 million. How many zeros are there after the 300? Only 6. That's right, just 6. How many people in the USA actually pay federal income tax? You guested it at 50%. It actually works out to only 1/3 or 100 million actual tax returns. Now figuring based on the people who actually pay federal income tax, how much do they owe? People who voted for Obama mostly don't pay federal income tax. For the ones who mostly voted Republican, the 100 million, they owe $130,000 each. Now, the median income in the USA is only about $60,000 per tax payer, so this debit amounts to two years of their full pay. If we were to really tighten our belts, I feel we could pay, at most, 10% of our annual pay toward the national debit. Do you think we could pay more? Remember that only 50% of the people pay any federal income tax. Now at 10% toward the national debit, it would take more than 20 years to pay it off. But wait, it is growing at 9.2% now and for the foreseeable future and the interest is just under 4% That means that if the real tax payes pay only 10% we won't even stay even. It is that bad.
Oh, I forgot one important point. I must have aptitude for politics. That point is that much of what is owed is not show on any of the federal balance sheets. If all the "unfunded" liabilities were added, it is my opinion that the national debit would over twice as big. Add in social security, there is zero money in the bank for future payments. It is all being paid out of current and future tax revenues. Add in all the guarantees that our government has made. If you did not know it, AIG was small potatoes compared to the liabilities agreed to by our government. 95% of all real estate loans are guaranteed by the federal government as well as student loans and retirement programs for union workers. Had we not given billions to the GMC unions and GMC went out of business, we would have still had to pay 90% of the promised retirement for GMC workers. When our government made these stupid commitments, things looked rosie and many felt that they would continue for ever. Now we all know that much of the past success of the USA was a fluke and a piece of luck of being in the right place at the right time after WWII. That will not happen again. We were never as smart or as rich as we thought. I know you don't like hearing me say that, but it is true. Every time I read interviews with successful business people, the reason for their success is always their "unique" ability. Isn't it strange that they never say that they were lucky to have been in the right spot at the right time? Notice how few of these hot shots can't pull of the big win twice in a row and neither can the USA.
I have harped on the fact that only 60% of our kids graduate from high school and that we are dead last in math of the top 30 counties in the world. Do you really think that a country with this quality of players can compete in the world? If you do, you are on something.
Being in debit is not all bad, but the difference with the USA is where we spent the money that is now our national debit. Take a personal example. Is there a difference between borrowing money to buy a home or borrowing money to take a vacation to Las Vegas? In the case of the home, you can always get some or all of your money back if you were to sell the home. In the case of spending on the vacation to have a good time, there is now way to get any of that money back. In my opinion, that is exactly what the USA did. In the great society program of LBJ, we gave people money who did not work to buy food and drugs that they ate or injected and now we don't have anything to show for it. Student loans is one of my favorite areas of social expenditure. We go into national debit to send our kids to college to take majors that have zero economic value. We waste every ones time and money on these worthless investments. It is actually a complement to call most student loans "investments". I am not against increasing the national debit if it is really an investment, but I am not interested in spending tax money or going into debit for worthless expenditures. I have known people who borrowed money to take a vacation and I know for a fact that these people all ended up in the poor house. This is exactly what the USA has done. A lot of people have had a good time on the public dime and it has to stop.
In all investments, the objective is to get your monies worth and a return on the investment. Here in the USA, we spend tax money on "fuzzy feel good" things that have zero future value, only the future debit. When we look back we see that many of us had a good time and we did. Many had a lot better time than they deserved because they were spending money or value that they did not own. I think that home equity loans at the peak of the real estate boom are the perfect example of what i am talking about. Many people felt that they were rich and that they had made it. They felt like the equity value in the homes was the result of their very smart investing when, in fact, it was pure luck and being in the right place at the wrong time. When the real estate market went bust, I did not hear these same people saying how dumb they were. They and Obama were all saying that it was someone Elise's fault. See how it works? Business people are similar as I explained above. We as citizens of these USA also feel that our role in the world and our apparent wealth has been 100% the result of our smarts and hard work, but our "luck" is running out.
I actually know of people who borrowed money to take a vacation and in all cases these people have ended up in the poor hours. It is the same for the USA with the national debit. The best example the situation that the USA is in is the "home equity" loan. I know people who thought they were so smart and felt that they were rich due to the rise in their "home equity" as a result of home price inflation. They thought that inflation was an easy way to actually make money. They have all found out that his was not real "earned" money, it was "funny money" and now it is not so funny when they have to pay it back out of "earned money". Our own government encouraged this type of conduct thru refinancing programs that through the federal agencies made this whole thing possible. Now we have the "unfunded" liability of these home loans that were garranteed at the height of the real estate inflated prices. It has given the concept of being "under water" a whole new meaning right along with "flipping". Sounds like the old TV show "Flipper". Flipping was skill and now being under water is some one else's fault.
I don't have the answer to all this, but I know that we were not as smart as we all thought we were nor were we really as hard working. It was luck and being in the right place at the right time and now it seems our luck has run out and we will have to return to real honesty. My mother used to always say that "Honesty was the best policy". Maybe my mother had the answer all along.
