Gov's Financial Moonshot - Graph
This page combines a simulation of federal finances produced by the US Government Accountability Office (GAO) with the assumption that state and local government finances remain the same as a percent of GDP.
GAO Long Term Fiscal Outlook, April 2007, Alternative Scenario
The GAO looks far into the future twice each year. Based on current law, the office forecasts that spending will rise from 31% of everything America produces now to 75% by the time today's infants are trying to put their own children through college.
This scenario assumes politicians do not increase the nation's current tax burden as a percent of GDP.
The budget deficit, the amount of fresh money the government must borrow each year grows from 2% of GDP to 45% of GDP.
That latter amount is the equivalent of a family earning $50,000 annually borrowing $22,500 every year for normal living expenses.
The federal debt held by the public is the debt government owes. It is all past years' deficits plus interest that is compounding. In the GAO forecast, the debt will grow from 37% of everything the country produces to 668% by the end of the simulation.
This scenario assumes that government can borrow all the money it desires.
It cannot.
At some point, probably long before the end of this simulation, people will question whether the US will pay its debts. Interest rates will rise. Recession is likely. Depression is possible. The uncontrolled borrowing likely will end in great public suffering.
Current law bankrupts the US government and impoverishes its citizens.
The problem is government-wide. Nonetheless, it centers on senior subsidies, specifically Social Security and especially Medicare. Medicaid is a source of sobering concern. Until now, people wishfully believed they could collect far more in benefits than taxpayers have agreed to fund.
There is no government nest egg for citizens' retirement. No actual money is set aside. People who rely on Social Security and Medicare for financial security -- and that is almost everyone -- have seriously misplaced their trust. The implications are profound.
It is likely that money will be uncomfortably short, even dangerously tight for retiring Baby Boomers and those who follow. See the page titled Senior Subsidies - Boom Before Bust. Younger people are likely to suffer, too, and not just vicariously.
In addition these graphs make the brave assumption that other government programs can be slowed to grow no faster than the economy as a whole. Make no mistake, the US, along with many other countries, are in deep dooey.
As you look for solutions to the looming debt crisis,and weigh the proposals that will be offered, be unafraid. It's a big problem. Adjusting will not be painless, but it need not be devastating, either.
