Well, this is a bit frightening – from William H Gross over at PIMCO:
…Previous Congresses (and Administrations) have relied on the assumption that we can grow our way out of this onerous debt burden. Perhaps we could, if it was only $9.1 trillion, as shown in Chart 2. That would be 65% of GDP and well within reasonable ranges for sovereign debt burdens. But that is not the reality. As others, such as Pete Peterson of the Blackstone Group and Mary Meeker, have shown much better and for far longer than I, the true but unrecorded debt of the U.S. Treasury is not $9.1 trillion or even $11-12 trillion when Agency and Student Loan liabilities are thrown in, but $65 trillion more! This country appears to have an off-balance-sheet, unrecorded debt burden of close to 500% of GDP! We are out-Greeking the Greeks, dear reader…
Gross figures we have to have tax increases and/or benefit cuts to get out of this. I disagree – spending does need to be cut, but benefits do not need to take a hit. Taxation does need major reform, but rates actually have to become lower in some areas (especially on savings and investment in productive activities). But regardless of how you think we should get out of this, the glaring fact is that we’re in a heap of financial trouble.
Now, how can we cut spending without cutting benefits? Lots of ways. First off, whatever number of employees we have in the federal government, we can probably let half of them go. If those who remain say they can’t do the job with the lower staffing levels, then we fire them, too. And keep firing and hiring until we find the people who can get the job done at the staffing levels we like. There is a way – and it will be found by employees who have their jobs at stake in finding the way to do it. Secondly, we can do without all or part of the Departments of Commerce, Energy, Education, Labor and Housing and Urban Development (and, in fact, most of our 50% reduction in force should come from complete or partial shuttering of these departments). Finally, lots of programs which go on in the federal government are luxuries of prosperous and indulgent times – unless they protect the lives, property and liberty of the American people, they have to go. Period. End of story. No, sorry, but you can’t keep it no matter how wonderful you think it is – we’re broke.
After that, the reform of taxation and the elimination of regulations which inhibit the creation of productive enterprises will allow our economy to grow – and grow in terms of real wealth – fast enough to cover the debt; eventually to pay it all off. This is not something to happen in a day or even in 10 years. It is a generational thing. It took us a century to get in to this mess, it will take us a while to get out of it. Most important is that we get on it – and our trouble is that as long as Obama is in the White House, we won’t even make the first move. Which puts us in quite a pickle, indeed.
On the other hand, a bit of suffering can be good for the soul – and the country. We’ve been fat, dumb and happy for quite a long time and our younger generation, especially, is a bit flabby. Perhaps the pinch of poverty is needed to spur us to new heights? At any rate, the real Americans of our nation will endure whatever problems come down and will simply get to work and do what is right – so, in the end, no real worries.
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