America appears to be in worse long-term financial health than Greece, Europe’s poster child for govermental mismanagement. According to a report issued last month by the International Monetary Fund (IMF), the United States has built up so much debt and so many financial obligations that the difference between all future expenditures and revenues, the so-called “fiscal gap,” will equal 14 percent of the gross domestic product (GDP) for as far as economists can project - in Greece, that figure is an unsustainable 11.5 percent.
So that means our federal expenditures will exceed revenue by 14 percent of GDP every year, forever. Consider the following example of how deep a hole we’re in. Congress will spend about 25.4 percent of GDP this year, and the only way to balance the budget would be to slash spending levels to 11.4 percent of GDP or double the existing tax burden, which is now 14.9 percent of GDP. Neither doubling the tax bite nor cutting overall spending by more than half appears to be a politically viable option.
In raising concerns about the rising U.S. debt levels, the IMF cited the massive unfunded promises that have been made through the Social Security and Medicare programs as the prime culprits in our present woe. Now the IMF adds the new Obamacare law to the list of causes of government overspending. “The main drivers of the fiscal gap are rising health care costs that under current law will boost mandatory spending to above 18 percent of GDP by 2050,” the July 12 report stated. “This means that mandatory programs may absorb all federal revenues sometime around 2050, or as early as 2026 when the cost of servicing the debt is added.”
In other words, we’re headed quickly toward the same fiscal crisis that triggered riots in Athens. Because the government spends money on more than just mandatory programs, the day of reckoning could come as soon as the next decade. In May, wealthier European nations were forced to contribute $147 billion in bailout funds to keep that Mediterranean nation from collapsing. A similar bailout scaled to the size of the U.S. economy would cost a staggering $6 trillion. There’s not going to be anyone to bail us out from troubles of that magnitude.
President Obama displays extraordinary hubris by spending $1.5 trillion beyond this country’s means this year alone. Defiance of economic reality will inevitably bring financial retribution of the sort that even Greece has not yet seen. We can only hope voters insist on change in November and that it’s not too late.