The US Debt is currently $16.5 trillion. That increases over $1 trillion per year. We borrow to fill this budget shortfall by selling treasury bonds. The US GDP is $15 trillion per year. That is economic activity, not wealth. The wealth of the entire world (including the US) is about $200 trillion. This is who we borrow from when we sell treasuries. Do you see the problem? Something will happen when the US runs out of lenders. There are a few possibilities, some (hopefully) remote and others (dismally) probable. Maybe, the world and US will see such good economic growth that those ratios all change for the good. Maybe there will be some kind of technological breakthrough that makes an economic miracle. Maybe, the lenders will start to get cynical about the US' ability to repay, and charge higher interest rates on treasuries, driving up our borrowing costs and increasing the deficit. This would be a downward spiral scenario. (Note, QE, where we print money to borrow from ourselves, isone way we're forestalling this at the expense of the dollar's value). Maybe the US will decide to devalue the currency, solving the problem for the short term, but destroying the US' ability to borrow in the future. This is what I call the "Banana Republic" scenario. Maybe there will be a huge war where we get to tear up a bunch of foreign-held bonds when it's over. After all, if treasuries' interest rates go up, values of bonds held by China go down, creating strain on their system. When the US economy sinks, everybody in the world hurts. Maybe the US will control its spending and stop increasing the deficit faster than the GDP grows. What do you see as most likely? There are about 100 million tax-paying families ("family" ranging from 1 to any number of people in a household) in the US. What if they paid more taxes to divert the coming cataclysm? It would take about $10k per family to close the deficit, with the highest earners paying the most (say you pay $30k in income tax now. Double that. If you pay $20k now, assume $30k on this plan), and the lowest earners the least. It wouldn't really close the deficit, because a lot of other economic activity that helps the GDP (buying cars and pools) would end. These numbers would have to go up when the entitlements really sky rocket. Are conservatives selfishly guiding us to ruin out of their desire to hold onto their new cars, vacations, and children's private school tuition payments? I don't think so, but I can see why liberals might say, "We have to go off a cliff because you don't want to pay up?" Conservatives I know have no faith that the government would apply increased revenues to the deficit. In a perfect world, government spending could be cut, and taxes would be no higher than the rate that optimizes revenue without choking economic growth. In the world we live in, the recipients of government spending (government employees, recipients of aid, government contractors, and retirees) are major voting factions, and the major funders of government spending resent overpaying for government. What do you want to see us do? Myself, I am becoming a huge fan of limited government. At the age of 49, I am changing my mind about defense. We can't afford such a large military, nor for so many to be deployed overseas. Neither can we afford expansive government programs. What will it take to spur action? I don't know, but I'll tell you the canary in the coal mine. When Illinois or California comes to Washington and asks Uncle Sam to buy their bonds, because the debt market is asking a higher interest rate on them, the downward spiral will be starting and we will see our last chance to pull out (with a lot of pain). Thoughts?
