Every time the subjects of quantitative easing, debauching currency, and gross domestic product enter a conversation, most Americans’ eyes seem to get a sleepy haze over them as they check-out of the conversation. “Don’t think about it. It’ll just get you upset.” In other words,“I’m taking an Ambien. Wake me up when the fiscal crisis is over.” As if the $17 trillion debt and all its nightmarish consequences will float away to la-la land if they sleep long enough.Sleeping away daunting fiscal problems was attempted by Washington Irving’s Rip Van Winkle 200 years ago. In the famous short story, Rip escapes to the woods to avoid his wife nagging about the farm’s struggling finances. He imbibes some strange liquor and falls asleep. When he opens his eyes again, he is shocked to discover his dog is gone, his rifle is rusted, and he has a long beard. Back in the village his wife has died and the portrait of King George III has been replaced by General George Washington. Rip’s world has changed dramatically.We are also living in a changing era as America’s position in the global market shifts and outside countries keep our fiscal moves under close scrutiny.In a best case scenario, economists estimate that, in ten years, if interest rates don’t raise and there are no wars or recessions and depressions, we will pile on an additional $7.2 trillion to our already whopping national debt. This will put us close to $25 trillion in the red with a crippling $799 billion a year payment in interest alone.Left unchecked, by 2020, 92 cents of every federal tax dollar will be needed just to pay for Medicare, Medicaid, Social Security, and interest on the debt. If these are the optimistic calculations for our near future, the realistic reckonings should keep Americans awake pacing the floors at night.
In the corporate world, there will be nearly a $500 billion trade deficit this year, compared to the 1980s when it was $300 billion. This means we are spending $500 billion more on products made outside of the United States than what we are exporting out to other countries. We also have the highest corporate tax rate in the industrialized world, at 39.2%, which further discourages corporations to remain on U.S. soil and has contributed to the loss of nearly 5 million manufacturing jobs from 2001-2010.
With Russia and the Middle East in major headlines, it’s interesting to compare the World Bank statistics. Russia’s debt-to-GDP ratio, a calculation used by investors to determine if a country can pay back its debt, is only 13.41% with $509 billion in reserves. Iraq’s is 31.34% with $77 billion in reserves. America has $448 billion in reserves, but this is hardly impressive when coupled with a deplorable debt-to-GDP ratio of 101.53% and a $17.8 trillion debt bill. China has an impressive $3.88 trillion in total reserves and is also the biggest foreign buyer of U.S. Treasuries by holding over $1 trillion of our debt.
As hard as the numbers have been to swallow over the years, we cannot just get bored of the “money talk,” close our eyes, and wake up when it’s over. Rip Van Winkle was lucky that, after 20 years, the only things he missed were the death of his nagging wife and the American Revolution. If we were to wake up after 20 years of denial and unbalanced budgets, instead of seeing George Washington’s picture over Rip’s favorite mantel, it could very well be Xi Jinping, China’s paramount communist leader, and you’d have to pay for your beer with the new world currency.
I suggest we either accept the inevitable pains associated with legitimately fixing our borrowed prosperity now, or plan on sleeping for at least another 100 years. We’d all best wake up and hide the sleeping pills!
Ashley R. Smith is a freelance writer and columnist who has volunteered for various charitable and Americanist causes, including providing regional leadership to mentor teens. As a mother of six children she resides in Colorado, holds a black belt in women’s self-defense, and a degree from Brigham Young University.