July 24, 2019

Is Economic Disaster Around the Corner?

It will not come from a war with North Korea or with Iran. It will come from within. The United States is deep in debt. It is bankrupt. We have done nothing and continue to do nothing to correct our $20 trillion dollar debt and annual out of budget billion dollar deficits that continue to mount. And at the very same time, the interest on the National Debt continues to rise.

The Treasury Department has been deploying cash-conserving measures since March, when borrowing hit the formal ceiling of nearly $20 trillion. These measures are expected to run out in early October. When this happens, the government won’t have money to pay the interest on its debt, write Social Security checks or make routine payments. Missing debt interest payments could send the financial markets into a tailspin. Nearly 61 million Americans plan on Social Security to pay their bills every month. The Social Security trust account has only IOU’s from Uncle Sam. The taxes that were paid on behalf of the Americans paying into Social Security every week have been appropriated by the government and converted and deposited into the general fund. Yes, the Social Security checks will stop.

Defaulting on the interest payments on our debts will surely result in the downgrading of the Treasury securities that are held around the world. Shock waves will reverberate through Europe and the Far East.

What is so sad is that we see this coming every year. The Federal Government does not generate enough taxes to pay its bills. Politicians talk about tax reform and tax reduction and bracket adjustments and corporate tax reform. The beat goes on and on. Meanwhile, the Federal Government runs an annual $500 billion dollar deficit; has an out of balance budget situation; and refuses to acknowledge that the interest on its debt is growing. For the fiscal year 2016, the interest on the National Debt was $432,640,652,901 (that’s billions of dollars). Interest on the 2017 debt could well exceed one half a trillion dollars!

The reasonable solution would be to balance the budget, reduce spending and increase taxes but neither the Congress, the President, nor the American people want to hear that. We are like the young couple that has spent itself into a gigantic hole. Austerity is the only answer for them going forward. Americans don’t want to recognize that we have to pay for the deficits of the past. Americans want their Social Security, Medicare, Medicaid, Food Stamps, disability insurance and possible health care legislation. The money has to come from somewhere. Medicaid is pure tax debt whether it comes from the state or the Federal Government.

Folks, this could be the year that the government shuts down and you know what hits the fan. Sooner or later, our Congress and President are going to have to be honest with the American people. Many average citizens don’t have a clue as to the debt on the books of the United States. We cannot continue to spend money we don’t have. We could push the can down the road and be like the country of Zimbabwe that kept printing money until it took $500,000 to take the bus.

And we probably will.

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Written by
Donald Wittmer

DONALD WITTMER is a retired business executive who held key roles in the automotive and banking sectors. For a time, he also served as a Fiscal Agency Manager for the Detroit branch of the Federal Reserve Bank of Chicago. He received his undergraduate degree from Cincinnati's Xavier University, an M.A. in business management from Central Michigan University, and earned certification in bank operations from the School of Banking at the University of Wisconsin-Madison. A husband, father, and grandfather, he teaches part-time at the Kent Place School for Girls in Summit, New Jersey.

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Written by Donald Wittmer