Pro/con: How should the U.S. handle our money?
I-n January 2010 our nation's monthly interest debt payment was $18.857 billion, according to the Congressional Budget Office. By way of comparison, it cost about $6 billion to build our most recent aircraft carrier.
In January 2010 our nation's monthly interest debt payment was $18.857 billion, according to the Congressional Budget Office. By way of comparison, it cost about $6 billion to build our most recent aircraft carrier.
We should pay what we owe before we pay for other items in the federal budget. If we don't pay, then we are in default of our obligations. In case anyone doesn't know, there are two parts to the federal budget. The first is entitlements; the second is discretionary spending.
Entitlements are very well named. We are "entitled" to these payments. In fiscal 2008, entitlements included Social Security, Medicare, Medicaid and
13 other programs such as food stamps. Health care is a new entitlement. In fiscal 2008, entitlements totaled
53 percent of the entire budget. The interest on the national debt was 9 percent. Thus, debt and entitlements in fiscal 2008 were 62 percent of every dollar spent. We pay for everything else after we pay for entitlements and debt. All other expenditures, including national defense, are referred to as discretionary budget items.
Let's look at a little of Social Security's history.
There was a Social Security Trust Fund holding money received. However, the Johnson Administration wanted to pay for the Vietnam War and not increase taxes. That decision made the Social Security Trust Fund too attractive. The Johnson Admin-istration took the trust fund money from the Social Security Admin-istration. In exchange, the Treasury Department issued IOUs. That decision has never been changed.
The Associated Press noted last month that the nation has just passed a very important date for Social Security: We are now paying out more in benefits than we are collecting in Social Security taxes. The last of the IOUs will be sold in 2035 unless radical changes are made.
At one time our population of workers contributing to Social Security was large. In 1945, there were
42 workers for each Social Security beneficiary. Currently, there are only three workers supporting each beneficiary. By 2035, it is projected there will be only two people working to support each beneficiary.
That's why we are in deep do-do.
And that's just one program.
In the belief that politicians lack the resolve to make the tough decisions needed to reduce annual deficits and to slow the growth of the debt, President Obama signed an executive order this year, creating a National Commission on Fiscal Responsibility and Reform. The commission is to recommend steps -- not including interest payments on the national debt -- the government can take to balance the budget by 2015.
Anybody want to bet on a balanced budget by 2015? It's not rocket science; the bigger the national debt, the bigger debt payments become. Debt payments will dwarf everything else.
Are there other items that may increase the national debt?
At the state level, according to the Pew Center, there is currently a $1 trillion gap between the amount promised and the amount set aside for state employee pensions. At the end of fiscal year 2008 states had set aside $2.35 trillion. However, the price tag for those pensions is $3.35 trillion. Want to guess who will pick up the tab?
The good news is that Minnesota is in pretty good shape. The worst awards go to Florida, New York, Washington, and Wisconsin. Only nine states were deemed "solid performers" and only two states, Alaska and Arizona, had 50 percent or more of the assets needed. That means Minnesotans will help bail out the "bad" states if Congress picks up the tab.
How did this happen? It's simple: Every elected official looked at the costs and then kicked the can down the road for the next official to correct. We cannot continue to play this game. We've run out of time.
John Lukan of Duluth is treasurer of the grassroots Citizens Research Council.