Thursday, December 18, 2008

How long before the U.S. goes belly-up?

Have a look at and contemplate the implications of this GoV entry.

Baron Bodissey writes:

Last night I mentioned the imaginary money that is being used to bail out the favorites of Treasury Secretary Paulson and other members of the Washington Mandarin class. The government has paid off bad bank loans and bailed out failing businesses by borrowing enormous quantities of money from — well, from future taxpayers who will somehow become three or four times richer than they are now under the new Socialist regime.

But it’s even worse than I thought: the level of federal indebtedness has moved beyond mere profligacy into a new realm of total financial fantasy. The national debt is about to surpass the net worth of every man, woman, and child in the USA.

As I said in a comment to the entry, I have no economic expertise, but I can add, and the numbers seem to me not to add up given current longstanding trends. Other commenters have pointed out that debt to net worth ratio needn't favor the latter for a person or an entity to remain economically viable. This is true I think and can be proven by a couple of simple examples. For instance, people frequently make large purchases which exceed their family's total net worth -- a house is a good example, but for some even the purchase of a 30 thousand dollar vehicle exceeds the individual's total net worth, whether he might like to admit it or not. I'm not saying it's wise (for an individual or a government) to do so, but it is pretty commonplace and it doesn't always end in financial ruin.

But again, the issue for me is the number of net taxpayers compared to the number of non-net taxpayers, current and future. What that comes down to in simple terms is the number of people who pay more in taxes than they receive in benefits vs. the number of people who receive more in benefits than they pay in taxes, and what that ratio will be in the coming years.

My view has always been that we have to reverse this trend. And that comes down to a little self-sacrifice on the part of individuals. Yes, it can be painful. But what that's truly valuable isn't painful in acquiring or achieving?


Call Me Mom said...

Nice catch, Terry.