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Everlasting Debt

Despite centuries of distaste for debt, the United States will be nearly $10 trillion in debt by Election Day 2008.

It has promised another $50 trillion or so in explicit and implicit benefits to be paid in the future—a number that has almost doubled during the presidency of George W. Bush; in fiscal parlance, these are “unfunded liabilities,” which businesses and state and local governments are forced to report on their books—but the federal government is not.

To put these numbers in varying perspectives, $50 trillion is equal to nearly 100 percent of Americans’ total net worth—everything that we as individuals, as businesses, and as a country own. It also adds up to a cool half a million dollars in debt for every American household. These numbers exclude an additional $2 trillion in state and local government debt and unfunded liabilities for employee pension and health care benefits. They also exclude Americans’ $2 trillion in consumer debt and $10 trillion in total personal debt, which rose to 130 percent of disposable income in 2007, a statistic made more haunting by the late-2007 credit crunch that may lead to at least one million home foreclosures and two million personal bankruptcy filings in 2008.

To say that something is wrong with this picture, as virtually every politician and budget analyst at least says, is a bit of an understatement. Yet Congress has repeatedly, and oh so easily, raised the national debt ceiling—the official limit on government borrowing—five times between 2001 and 2007, by nearly $4 trillion. Meanwhile,America’s ratio of debt to national income, or gross domestic product (GDP), rose from 57 percent to 66 percent in the four years beginning in 2005.

Anyone who has visited Disney World’s Haunted Mission remembers the ride’s signature beginning: visitors enter a room, the doors close and the ceiling appears to keep rising and rising as a spooky voice intones that there is “no way out.”America’s national debt bears frightening similarities to this Disney attraction. The debt ceiling, like the physical ceiling of the Haunted Mansion, keeps rising and rising, and whether there is a “way out” is a matter of economic and policy debate and political will.

From Forgive Us Our Debts: The Intergenerational Dangers of Fiscal Irresponsibility by Andrew L. Yarrow,Yale UniversityPress, 2008.

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