The United States is in the grips of a massive spending spree. Politicians are on an unprecedented spending binge that has led to dangerous debt levels and destructive federal deficits. In fact, just recently the national debt reached $13 trillion. Our politicians accumulated the last trillion in the past six months alone. The federal debt is quickly approaching levels seen in Greece (which is about 115 percent of its GDP) and other troubled European economies. The bottom line is that Washington is operating on a spend-now, pay-someday approach that is putting our financial stability at risk.
The situation is about to get worse. Mandatory spending is growing at a pace five times faster than discretionary spending and already takes up two-thirds of the entire federal budget. Medicare and Medicaid are underfunded and Social Security is facing a shortfall as the Baby Boomers retire (e.g., starting with a ratio of workers to recipients of 16.5 to 1 in 1950, the ratio is now down to 3.2 to 1 and projected to decrease even more in the coming decades).
A key step to entitlement reform would be a genuine effort to cut waste, fraud and abuse from the programs. For example, Medicare fraud alone is estimated to cost the taxpayers about $60 billion annually.
Discretionary spending has surged by 79 percent over the past decade. Even worse, because of archaic budget rules, this increase is here to stay since it is considered “built in” to annual spending requests. From anti-poverty spending programs to defense and education, the federal government now spends a record $30,543 per household. The U.S. has not seen this pace of growth in spending since World War II, after which the country quickly pared down its spending.
Why is government growing so rapidly?
According to the latest numbers from Bureau of Economic Analysis, the average federal civilian worker now earns double what private-sector workers earn when factoring in wages and benefits ($119,982 vs. $59,909). This is another reason why government spending is out of control.
There’s little doubt that the path we’re on is unsustainable. Washington is squandering your salary, your savings, and your future, not to mention your children’s and grandchildren’s. Of course, a certain amount of government spending is necessary and prudent. Despite occasional changes in tax rates, revenues have historically remained around 18-20 percent of GDP. The more we increase our rate of government spending, the faster we are likely to move toward a financial calamity similar to the one currently affecting Greece.
It’s not too late to solve this problem. Our legislators must be willing to make the tough choices needed to put our fiscal house back in order. If we return America to the prudent spending levels of the 1980’s and 1990’s–20 percent of GDP – we could balance the budget by 2012 and better protect the future prosperity of our country for our children and grandchildren.