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When Will America Recover?
Op-Ed Detroit Free Press - Congressman Nick Smith, Retired - February 26, 2010
I just returned from speaking at Oxford and several other British Universities on American politics and the economy. England, like the United States, has high unemployment and huge government debt. Many I spoke to believed that the current global economic mess is all our fault. In a sense, they are right. As the world's leading economy, our economic health affects everyone, especially trading partners like England. We are its largest trading and investment partners at $400 billion last year.
The students were most interested in my opinion on how long it would take before America recovers economically. Some White House economists are predicting that we can fully recover from this recession in a year or two. As I told the students, however, it will take ten years or more to rebuild the economy - and then only if we can control our spending. It's not just "the government" or even "the Democrats." All of us, government and consumers alike, have been living on borrowed money. Our national savings rate three years ago was a negative number. One bit of recent good news is that consumers have increased their average individual savings rate to over five percent, which means less consumer spending in the short run but a stronger overall economy in the long run. The Government needs to do likewise.
But Congress not only continues to borrow, it is borrowing more than ever with no sign of stopping. Deficit spending, expected to hit $1.5 trillion, is one-third of the President's proposed budget. His budget projects huge deficits every year for the foreseeable future. Our debt, which is the sum of all historical deficits, now adds up to $12 trillion. Interest on that debt consumes almost ten percent of federal spending. Without dramatic change, the future will be much worse. Interest rates will be doubling and the unfunded liabilities (what we've promised to pay out in the future) for entitlements such as Medicare, Social Security, Medicaid and veteran's benefits adds up to another $60 trillion debt - in today's dollars.
Reckless spending has mostly been driven by Congressmen currying favor with voters who demand ever more money and services from "the government" to solve their problems. But the government gets its money from current taxpayers and lenders. Who will repay these lenders? Future taxpayers. Each baby born in this country is instantly saddled with $40,000 of government debt, not including interest. And that does not include future deficit spending or the $60 trillion in unfunded liabilities. We have ended up with a tax, borrow, and spend government that will handicap future generations. Ten years ago, our federal spending was 18% of GDP, 4 years ago it was 20%, and today it's over 24%. The dollar increase will have gone from $1.8 trillion in 2000 to $3.8 trillion in the President's budget. That is over a 200% increase in ten years. Washington's over-spending not only mortgages our children's future, it crowds out business and industry borrowing today, for research, expansion, and ultimately jobs.
As alarming as these numbers are, even more worrisome is that our political and economic system is nearing a tipping point that, if reached, will change this country forever. Today 50% of voters pay less than 2% of the total income tax., These voters want the government to solve more of their problems, and why not? It's in their best interest to elect politicians who will spend more, because they don't have to pay for it, and it's in politician's best interest to vote for that spending to get reelected. Meanwhile, countries like Communist China, which has lent the United States nearly a trillion dollars, gains more and more influence in foreign affairs, literally at our expense.
The point is that we're close to losing our status as a strong economic power. That affects us, our children, England, and the rest of the world who rely on us for our leadership and for much of their own economic well being. It is in all of our interest to be less dependent on Washington, be more self sufficient, and bring down government spending.
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