Our Great-Grandchildren Are Already Broke
Your great grandchildren are broke.
They may not even be born yet, but they are still broke.
The government has spent us, our children, our grandchildren and even our great-grandchildren into a black hole of debt. The world is drowning in debt. At some point, somebody will have to pay for it – one way or another.
We hear a lot about the $21-plus trillion dollar national debt. But that’s just the tip of the iceberg. When you add private debt, pension liabilities, other mandatory government spending mandates, Medicare and Social Security to the equation, Americans have debt obligations approaching 1,200% of GDP.
These are essentially promises that can’t be kept.
And debt begets debt. As economist Lance Roberts pointed out, increasing debt requires even more debt to fund it in an ever-deepening spiral.
As this money is used for servicing debt, entitlements, and welfare, instead of productive endeavors, there is no question that high debt-to-GDP ratios reduce economic prosperity over time. In turn, the Government tries to fix the ‘economic problem’ by adding on more ‘debt.'”
Some people claim debt doesn’t really matter. They’ll tell you that governments are “self-funding.” But if nothing else, there is evidence that high debt levels retard economic growth. Studies show GDP growth decreases by an average of about 30% when government debt exceeds 90% of an economy.
The CBO conservatively estimates the debt-to-GDP ratio currently stands at 77%. But this is likely understated and leaves out a number of factors. Trading Economics calculated the 2017 debt-to-GDP ratio at 105.4%. Even using the more conservative CBO number flashes giant warning signs. Last year, the CBO issued a dire forecast, saying the number could skyrocket to 150% by 2047 if the trend remains unchecked.
And there doesn’t seem to be any urgency in Washington D.C. to put the trend in check.
Republicans claim economic growth will pay for their tax cuts and spending increases. The CBO does in fact project the recent GOP tax cuts will generate economic growth — a whopping 0.7% growth in economic output over the next 10 years. Sorry. That doesn’t “pay for” the tax cuts. And yet the powers that be remain unwilling to address the budget issues undermining the economic growth they’re depending on. This isn’t political rhetoric. It’s simple math.
As Peter Schiff has said, tax relief is great, but we really need government relief.
Yeah, I want to lower the top rate of tax, but I also want to make government smaller. I want to reduce government spending so that we no longer need all that tax revenue. But of course, I’ve said that over and over again. This bill provides some people with tax relief, but no people with government relief. Government is getting bigger; government is getting more expensive. So, how are we going to pay for it? If we’re not going to pay for it with taxes, well then we’re going to pay for it some other way. But pay for it we will.”
And that leads to the more fundamental problem – somebody has to pay back all of this debt. And as Peter said, we are going to pay it. We’ll either pay for it with higher taxes or we will pay for it through inflation when the government prints dollars to fund more spending and to settle its current obligations.
When I say we, I don’t just mean you and I. I mean generations to come. Because politicians are great at kicking the can down the road. That means the burden will eventually fall on our grandchildren and great-grandchildren. We have babies being born today who are already broke and in debt.
That’s not a very good legacy to leave them.
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