Copyright by John T. Reed

With each passing day, we hear pundits, politicians, and citizens vow not to pass huge debts onto our kids and grand kids. We’re not going to “kick the can down the road.”

• Actions speak louder than words. We are, in fact, doing exactly that, and have been for decades.
• What is the calculation that says the fuse on that time bomb will burn that long before exploding?

Our kids and grand kids are already screwed. So, most likely, are we.

Our vow to protect our kids and grand kids is pure hypocrisy. It’s been hypocrisy for a couple of decades. We have long heard that we cannot afford to pay social security to the Baby Boomers, the first of whom can start collecting in 2014.

We have further been told that Medicare and Medicaid are even worse, that is, more costly than social security and enough to bankrupt the nation all by themselves.

Add to that President’s Bush’s panicky response to the stock market crash in September, 2008 and the ensuing “there’s no time to think about it” bailout or TARP.

Then we had President Obama. He and his Democrat allies in Congress have behaved in such a mind-bogglingly irresponsible manner with regard to deficit spending that no words can express it.

In addition, Obama’s anti-business policies like killing the NAFTA treaty with Mexico; “Buy American” provisions in the “Stimulus” package; letting unions run wild; forcing Detroit to make tiny global-warming, high-mileage, electric cars; taxing all use of fuel; over regulation of business, and so on will prevent the economy from achieving even a normal recovery that could pay off some of the debt.

Obama has raised the national debt to $11 trillion. His own budget says he will raise it by another $1.3 trillion by 2013 (He assumes unprecedented growth.). However, the non-partisan Congressional Budget Office says there will be no such growth, and the amount by which Obama will raise the national debt is not $1.3 trillion; it’s $5 trillion.

Since the gross domestic product (the gross sales and salaries, etc. of everyone and every business in the U.S.) is only $14 trillion, it appears that the national debt will be $16 trillion ÷ $14 trillion = 114% of the gross domestic product of the U.S. We have only been that high once—at the end of World War II—when we hit 122%.

We must cut back to a Draconian level on all sorts of spending including social security benefits, Medicare, Medicaid, TARP, Obama’s “stimulus,” Obama’s $800 billion of earmarks, and Obama’s budget. All of that insanity needs to be stopped immediately and the insanity of the past few decades must be reversed.

There is, however, no prospect of that. America is marching off the financial cliff behind the Pied Piper of Hyde Park. The notion that our kids and grand kids, not us, will pay this assumes it will not need to be paid for at least another 30 years or so. Ha! The truth is, the bond market may refuse to keep funding America’s mad spending binge next year, next month, or next week. If it does, we will pay, and our kids or grand kids.

The problem is it takes two to Tango, or to deficit spend. Obama and the Democrats cannot spend money like drunken sailors with Treasury Department credit cards unless someone is willing to continue to lend them that money. The Chinese have already begun selling U.S. bonds. They previously bought more and more every year and kept them until maturity. They are the biggest foreign owner of them. If significant numbers of Americans and/or foreigners stop buying the bonds, interest rates will rise and it will become apparent that we have no hope of over paying off that debt and the interest on it.

We were able to survive the 122% of GDP debt in 1946 because the nation had been in a Depression for 17 years at that point. The GDP that the debt was 122% of was a greatly depressed GDP and the nation was about to boom as a result of the end of both the Great Depression and World War II. The current GDP is near the the highest GDP ever in our history. Our current “wars” bear no resemblance to the scale of World War II. Plus there’s no indication they are about to end. 6% of the entire U.S. population was active-duty military in 1945. Today, just one-half of a percent of the population are on active duty in the military.

When we can no longer sell our bonds, the drunken sailors’ credit card will be destroyed and all this insane spending will have to be paid from current tax revenues. In fact, there is no way the American taxpayers will tax themselves enough to pay that bill. The debt will be repudiated or the U.S. government will print money to create high inflation or hyperinflation. Inflation makes it much easier for the government to pay off bonds. Hyperinflation simply reduces the amount owed to essentially zero by making the $16 trillion we owe near worthless.

Unfortunately, that trick also renders worthless the savings accounts of all Americans as well as all types of bonds and mortgages owned by Americans. In 1920s Weimar Republic Germany university endowments (containing bonds) and cash value life insurance, among other things, were rendered worthless by hyperinflation.

There will be massive cut backs in safe government jobs. People who receive checks from the government will stop getting them or will get much smaller checks.

Ask not for whom the national debt bell tolls, parents and grandparents of America. It tolls for thee.

I appreciate informed, well-thought-out constructive criticism and suggestions. If there are any errors or omissions in my facts or logic, please tell me about them. If you are correct, I will fix the item in question. If you wish, I will give you credit. Where appropriate, I will apologize for the error. To date, I have been surprised at how few such corrections I have had to make.