Who will pay the US debt?
Some months back, I wrote an article about the coming financial crisis as a warning to the American people about the US debt, budget and trade deficit. Since then the situation has continued to worsen and no-one it seems is willing to address this important issue.
When George W. Bush became president in 2001, the United States' public debt was 5.8 trillion dollars. Today the public debt stands at 8.3 trillion dollars. Of this over amount, $2.2 trillion dollars is held by foreigners. United States has a GDP of 12.4 trillion dollars. This gives U.S. a Debt/GDP ratio of 66%, placing it in 35th place (out of 113) on the ranking of the Debtor Nations. The current account deficit of over 7 per cent has long passed its danger levels of 4-5 per cent. In 2005 the U.S. government paid $325 billion dollars in interest payments.
Added to this are the future obligations such as Medicare $30 Trillion dollars, Social Security: $12.7 Trillion dollars, Federal debt: +$4.3 trillion dollars, Federal and Military pensions $3.9 trillion dollars and other debts of $2.2 trillion dollars. These obligations amount to $53 trillion dollars will become due in 2008 when over 78 million baby boomers begin to retire.
It seems that these astronomical sums worry only a few in the academia for the politicians, the Wall Street experts and the media constantly talk about the continuing good times and/or a controlled cooling down of the economy. This simply doesn't add-up. Who are they fooling and why?
The fact is that those in power do not want to be blamed for this mess. Bush can not in all honesty justify his huge tax-cut to the rich in the face of these economic imbalances, nor can he explain the necessity of spending so much on such things as his elective War in Iraq. The long-term cost of the Iraq war is estimated to be between $1 to $2 trillion dollars. He is also thinking about starting another war with Iran that will be even more costly than the Iraq and Afghanistan wars. How is he going to justify his fiscal irresponsibility if it came out that there was no money for pensioners or social security?
A pertinent question to ask would be why the opposition party is not informing the public about the economic crisis facing the US. The simple answer is that the opposition does not want to ruin it's chances of being elected. It is unlikely that voters would cast their ballot in favour of a candidate/party who is going to increase taxes and cut social spending. Also the current political system is such that anyone that goes against the rich and the special interest groups will not receive the necessary funds for his/her election campaign.
If we look at the election results we see that money plays a central and important role in determining the outcome; in other words, money talks.
Money talked with a roaring voice in the 2002 midterm elections, according to a post-election analysis by the non-partisan Center for Responsive Politics. Just under 95 percent of U.S. House races and 76 percent of Senate races were won by the candidate who spent the most money, the Center found. That translates into 413 of 435 House races and 26 of 34 Senate races. The findings are based on candidates' final reports for the 2002 election cycle filed with the Federal Election Commission.
Running for a seat in the Senate or the congress is prohibitively expensive. Running for president is even more expensive than the senate or the congress. The actual costs are immense. For example in 1992, the two political parties spent $220 million dollars on behalf of their presidential candidates. The total cost with government's contributions etc, was $550 million dollars.
"The costs of electing a president - some $550 million - represent about one-sixth of the nation's $3.2 billion ($3.200 million) political campaign bill in 1992. The remaining funds were spent to nominate and elect candidates for Congress ($678 million), to nominate and elect hundreds of thousands of state and local officials ($865 million), and to pay the costs of state and local ballot issue campaigns and administrative, fund-raising and other expenses of party and non-party political committees."
But where did all this money come from and why? Some money was provided by people like you and me with donations of maximum of $1000. But just to cover the presidential election we would need 200000 people each sending in $1000 to the party headquarters. We know of course that this wasn't the case. It was the special interest groups and the lobbyists that provided a substantial contribution to each candidate's campaign costs. Of course the rich (owners of corporations etc) can not contribute directly, so they contribute to Political Actions Committees (PACs) which in turn make donations directly to candidates.
As can be seen this system is skewed in favour of the candidates with money. Those candidates are in turn beholden to their party and PACs, making them dependent on the rich and powerful for finances. In the end, the candidate has to consider the interest of these powerful groups before making any decision. That is why sometimes one sees different administrations adapting policies that are against the long-term interest of the nation without any meaningful protest by the people's representatives in the congress or the Senate.
