Washington is full of drama. Americans are constantly being treated to high political suspense. Whether it’s the scandal-ridden death of an ambassador, an outrageous gun dealing policy gone wrong on our southern border, or the spectacle of politicians scurrying frantically at the eleventh hour to raise the federal debt ceiling and keep Uncle Sam running, there is usually no shortage of political theater emanating from the nation’s capital.
At present, the drama centers around the so-called “fiscal cliff” negotiations between the president and congressional leaders. According to the mainstream media, the big question is, can Congress and the president avert economic catastrophe by agreeing on tax increases on the rich and some spending cuts before a January deadline would automatically terminate Bush era tax cuts and cut military spending deeply, thereby causing an economic crisis?
It’s no secret that the fiscal condition of the United States is apocalyptic. With $16 trillion of current debt and tens of trillions of dollars more in future unfunded liabilities for Social Security and Medicare, there is no possible way for the United States to ever meet these obligations short of its current strategy of printing money out of thin air. And, of course, that is a financially suicidal option.
The big problem is that the federal budget is inflexible. In Fiscal Year 2011, $2.303 trillion in tax revenue was collected by the federal government. In that same year, the government spent $454.4 billion on interest payments and $2.025 trillion on mandatory spending, such as Social Security, Medicare, and Medicaid. Thus, money that Uncle Sam was forced to pay out exceeded all revenue collected by $176.4 billion. This doesn’t include discretionary spending, such as defense appropriations. Mandatory spending and interest payments will only grow as more baby boomers retire and the Treasury goes deeper into debt.