Speaking truth to leftist deniers: American is broke (with fancy charts from Heritage)
American is broke. This shouldn’t come as a surprise to anyone who’s looked at the national debt clock recently, but the unwillingness of some individuals to admit this or, worse, disparage those who point out this fact is shameful.
Consider what liberal columnist E.J. Dionne Jr. writes in the Washington Post:
Just one problem: We’re not broke. Yes, nearly all levels of government face fiscal problems because of the economic downturn. But there is no crisis. There are many different paths open to fixing public budgets. And we will come up with wiser and more sustainable solutions if we approach fiscal problems calmly, realizing that we’re still a very rich country and that the wealthiest among us are doing exceptionally well.
Two points here. First, the statement “[w]e’re not broke” really hinges on the definition of broke. Dionne is right that America has enough money pay its bills today (through unsustainable amounts of borrowing), but he’s wrong – and being wrong here has serious long-term consequences – if you define broke as not having money to meet your long-term debt obligations.
On an individual basis, imagine a man with no savings making $40,000 year who has $20,000 in student loans, $25,000 in credit card debt and $15,000 in car debt. Is he broke? Maybe not, he might be able to make minimum payments and scrap by without declaring bankruptcy.
Now imagine that same man is making a $600 a month mortgage payment, but he has a balloon payment of $250,000 due in six months. This would be fine if his home was worth the $300,000 he paid for it, but because of the downturn in the market, his home is only worth $100,000. Is that man broke? Yes, yes and yes. And if he was your friend and family member, I hope you’d have to common decency to tell him so, instead of letting him live in denial for just a little while longer and worsen the inevitable crash.
He can (barely) make his payments today, but in the very near future he won’t have the money needed to meet his obligations. He’s broke.
That man also represents the United States of America.
Second, Dionne’s “there is no crisis” line would be like telling the man in the story above that everything will work out if he makes no or minimal changes to his spending patterns. Sorry, America doesn’t have that kind of time.
And here’s where the charts from the Heritage Foundation’s excellent 2011 Budget Chart Book come in. America’s national debt is set to skyrocket.
So why does this matter? Are you following what’s happening in Greece right now? Our debt-to-GDP ratio will approach theirs in less than 15 years.