home | Tea Party Economist | Short Video: Why the U.S. Government . . .

Short Video: Why the U.S. Government Will Default on Its Debt

Gary North
Printer-Friendly Format

Sept. 17, 2012

The deficit of the U.S. government cannot be sustained. The general public does not understand this. Congress seems not to understand this. There is going to be a political crisis when the government begins cutting of the special-interest group most responsible for this deficit: retired people.

This 6-minute video proves that it is oldsters who are breaking the federal government's bank. It presents the official government numbers in a clear fashion. It shows what a well-designed screencast video can do. It has been seen by 2.6 million people. If you are impressed, forward this page to a friend.

What we see here is the tip of the famous iceberg. The video deals with the so-called on-budget debt. It does not assess the impact of the off-budget deficit: the unfunded liabilities of Social Security and Medicare. Prof. Lawrence Kotlikoff of Boston University has estimated the annual deficit of this budget -- the real deficit -- is rising by at least $11 trillion a year. Worse: this is the present value of the annual increase in unfunded liabilities -- what we must set aside today to invest in the world economy, and which will earn 5% or so for the next 75 years. The total deficit is now over $222 trillion: present value, not future red ink. The story is here.

So huge is this real deficit that it dwarfs the official deficit discussed in the video. But that's all right. The video still gets across the story: the deficit is larger than the total cost of the federal government, minus the welfare programs and interest payments.

The video ends with a warning: if this issue is not dealt with, we will go down on the government's sinking ship.

It will not be dealt with. You know this. I know this. To deal with it, the Congress must immediately cease all payments on Social Security and Medicare. This is politically impossible. All candidates know this. So, they will not deal with it. They will kick the can down the road. So, the ship will go down, and voters will at some be left with this question: What to do with granny?

If you are on a sinking ship, and there are not enough lifeboats to hold the passengers, it is wise to start moving toward the lifeboats. You want to be first in line. Most people will not be able to get off the ship.

Printer-Friendly Format