Twenty trillion dollars. That is the estimate of federal indebtedness by 2020. But that $20 trillion is just the federal debt: it does not include $3.4 trillion in current annual spending, nor does it include state and local obligations.
Government has no intention of paying off this debt -- only of continuing to add to it. What that means is that taxpayers are obligated to service this debt (and whatever is added to it) at prevailing interest rates forever. Those rates could range from 3% on up -- to whatever rate the bond market assigns. Generally speaking, the more debt a nation incurs, the higher the rate over time.
At 3%, the annual cost of servicing a $20-trillion debt is $6,000 per taxpayer (assuming that half of all Americans pay no federal taxes), or $12,000 per middle class couple. This amount is in addition to whatever Congress appropriates each year. By 2020, the annual appropriation (currently at $3.4 trillion) may well reach $5 trillion, which is $50,000 per taxpayer. Assuming that $1 trillion of this amount is passed along annually to the national debt, the immediate obligation would be $40,000 per capita. Add $40,000 to $6,000 and we get $46,000, or $92,000 per taxpaying couple.
The Heritage Foundation provides a similar estimate. Federal spending in 2010 will come to $30,543 per household, at least half of which pay no income taxes. A conservative estimate of a 60% increase in spending by 2020 implies federal spending of nearly $50,000 per household, half of whom pay no taxes.
These figures do not include state and local tax obligations, which consist of future pension liability and bond indebtedness. California, for instance, is in hock by $68 billion (December 31, 2009 figure), or $1,838 per capita. This may seem like a modest figure, but it does not include a 2010 deficit of $19 billion, nor does it account for future pension and benefit obligations.
Some states have begun to face the debt crisis by scaling back pensions and benefits. Conservative governors in Indiana and New Jersey have demanded reductions in spending. In most states, however, the predictable response is to raise taxes, issue more debt, and lobby for more federal assistance. This is certainly the case in Illinois, which faces a current deficit of $13 billion. Rather than enact major cuts in services, Democratic Governor Patrick Quinn has resorted to raising taxes, borrowing more money, and simply not paying his bills.
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In 2011, the U.S. national debt will exceed GDP for the first time in our history. It is at this point that a nation loses control over its finances. Once debt exceeds GDP, it becomes more and more difficult to service the interest on the debt. For politicians, there is the temptation to simply shift interest payments to long-term debt, thus setting off a vicious cycle of ever-rising interest payments. At some point, GDP no longer generates enough wealth to service the debt, and the only option is default. For ordinary citizens, the result of default will be decades of poverty.
Those who understand what is happening have a right to be angry, and their anger should be directed at Congress and the president. We should not sit by and watch as our nation is ruined by frivolous spending. The solution is to toss out the big spenders -- Republicans and Democrats alike -- and to continue tossing them out until they balance budgets and begin paying off the national debt.
The rest here.
Also note that this article doesn't even address the additional $70-120 trillion in future debt due to unfunded federal and state liabilities (social security, medicare, etc...)
I see a resemblance here to the late 19th century when a large portion of the population was sure that huge inflation would cure the then economic problems. Many were the "Silverites" who managed to push the price of silver higher. Today, it seems more destructive.
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