State of the Union Speech: The Main Thing is Missing
by Rabbi David Eidensohn
President Bush's State of the Union Speech left out the main problem facing the country, the national debt. Not only did Mr. Bush fudge on this, he declared that by 2009 the deficit would be cut in half, as if, by then, we are out of the woods financially. Indeed, the problem facing this country is not one of deficits or debt. We are facing total fiscal collapse, because government income is very small for the debt burden it carries, and because in the coming years, not far away, we will have to come up with trillions and trillions of dollars, when our annual income is only two trillion. Mr. Bush did not mention this, and by ignoring it, he surely has no plan how to deal with it.
According to the CIA Factbook, government revenues for 2005 were 2.119 trillion dollars. Expenditures were 2.466 trillion. Thus, we spent more than we earned to the tune of 347 billion dollars. What does 347 billion dollars mean? We have slightly less than 300 million people in America. Therefore, 347 billion dollars means that for each person in America, over one thousand dollars was added in debt. So what? Can't we, a rich country, pay our debts? What is there to worry about?
First of all, if we have an annual deficit of a third of a trillion dollars, in six years, we will have two trillion dollars in debt. Yet, we only earn two trillion dollars a year. Can a person who earns a hundred thousand dollars a year borrow so much that in six years his debts will be one hundred thousand dollars? Is this level of debt tolerable? It is not. It is very frightening. Even more frightening is that Mr. Bush and the politicians are not in the least bit frightened.
The national debt rose in one year, from 2004 to 2005, by over half a trillion dollars. This is the result of the .35 trillion deficit, and interest payments. If we earn two trillion and our deficit increased .35 trillion, and our national debt increased by over .5 trillion, all in one year, why are we not terrified?
The disaster of the deficits can be dealt with in one of two ways. One, just keep printing money and borrowing. The other way is to cut programs, such as entitlements. The major entitlement expenses are Social Security and Medicaid. Thus, to salvage the budget and reduce deficits, we will have to destroy the lives of retirees and the elderly. Another way, of course, is to tax the one percent of Americans in the highest income bracket who own over half of corporate wealth. But that will not happen under this administration.
The National Debt as of today, Feb 2006, is about eight trillion dollars. (The latest figures I have is 7.9 trillion as of September 30, 2005.) In one year, from 2004 to 2005, the national debt rose over half a trillion dollars, from 7.3 trillion to 7.9 trillion. In 1950, after fighting World War Two, our national debt was less than a trillion dollars, "only" 257 billion dollars. In ten years, by 1960, the debt increased very little, to 290 billion dollars. Thus, for these ten years, the national debt increased only about 3.3 billion dollars a year. From 1960 to 1970, the national debt went to 389 billion, an increase of almost 100 billion, or about ten billion a year.
From 1970 to 1980, the national debt rose to 930 billion, an increase of half a trillion dollars, an increase of about 50 billion dollars a year. Thus, from 1950 to 1980, a period of thirty years, the national debt did not reach a trillion dollars. This despite fighting three wars, World War II, the Korean War, and the Viet Nam War.
The national debt reached the trillion dollar level only in 1981, at 1.028 trillion. Ten years later in 1990, the national debt had reached 3.2 trillion, an increase, in ten years, of over two trillion dollars. The next decade, 2000, also had a two trillion dollars increase in the national debt, which now stood at 5.6 trillion. Thus, for two decades in a row, the national debt rose by two trillion dollars. But in only five years, from 2000 to 2005, the national debt again rose by two trillion dollars, in half the time! Are we not worried? Can we have a State of the Union message without even mentioning this, and without rectifying it?
In other words, the problem is not the amount of the national debt. The problem is the process of debt growth. The national debt is not rising, it is exploding, and each year brings faster and faster, or exponential growth. Nobody, no business, no government, can long resist the destructive force of high debt. But when the high debt suddenly snowballs, when it makes geometric progressions, dancing by trillions in a mere five years, then we have to stop and deal with it.
The president has no way of rectifying the national debt. Therefore, he doesn't mention it. But the problem is still there.
It is waiting, patiently, for the soon to be realized 11 trillion dollars needed for the next generation of Social Security. Now there is a new drug program which may produce fantastic debts, some say even more than Social Security.
So, what does Mr. Bush tell us about the economy?
"Our economy is healthy and vigorous, and growing faster than any major industrialized nations." Funny about that, didn't the Chinese increase, for the 25th year in a row, a fiscal improvement of about 10 percent while we are languishing around the inflation level? Does China have a national debt almost four times as large as its annual income?
"The American economy is pre-eminent." Let's have the facts, please. Your income? Your debts? How you intend to pay them?
"Americans should not fear our economic future, because we intend to shape it." How? Where are you going to get 8 trillion dollars to repay debts when you earn only 2 trillion a year?
Mr. Bush does mention, not the national debt, but the problem of entitlements. Some of them by 2030 will, he says, "be almost 60 percent of the entire federal budget." But why not tell us how much it will cost to finance 8 trillion dollars in debts, which by 2030 may well be double or triple that?
The future will be congress slicing entitlements for Americans, while it pours billions all over the world, money it does not have, but borrows. How long will this go on? It will continue until China begins calling in America's debt notes, and nobody will take up the slack. Even if they do, by that time, the money we borrow may cost ten percent interest. That is a hundred billion dollars per trillion. If we have a ten trillion dollar debt, we will have to pay one trillion dollars a year for interest, and we only earn two trillion dollars a year.
That will be the beginning of the end, but actually, we are already there. We are now waiting for the end of the end.