America the Expensive

There is an ugly truth here. It's a bit like the proverbial elephant in the room. That is to say it's there, it's true, everyone knows it (or should) --- but nobody is ready to talk about it. Are they afraid to talk about it? Or do they just not know how to talk about it?

New York Times' editorial writer Eduardo Porter recently published a book that he titled, "The Price of Everything: Solving the Mystery of Why We Pay What We Do." I haven't (yet) read the book. But when I first heard about it, I thought the title was very catchy. The Price of Everything. Isn't that just the question that needs to be answered?

I don't know why we pay what we do for different things. But I'm sure that Mr. Porter will be able to enlighten when I read his book. I'm just not sure that he's answering the most important question. I mean, is it more important that we know why the price of everything is ... or what the price of everything is?

As you and the rest of the world are painfully aware, the United States is struggling with federal budget deficits and a national debt that is staggering. A fascinating web site that I visit from time to time is http://www.usdebtclock.org/. It provides a running account of the debts and unfunded liabilities of the federal and state governments of the United States.

Our politicians are only just now starting to intensify the dialogue in Washington, DC about what to do. It remains to be seen whether they'll really get serious about increasing taxes, reducing spending and putting the U.S. federal government on firm financial footing again. At the state level, the various state governments are reacting in different ways. Some are slashing spending. Some are raising taxes. Most are - like the federal government - just wringing their hands without actually taking any tangible action to address the issue.

And exactly what is the issue? Quite simply it is that living in these United States is an expensive proposition. The freedoms that we celebrate? They're expensive. The security that we appreciate? It's expensive. The global leadership role? Expensive. Those civil rights? Expensive. That rich heritage? Expensive.

Do you see the correlation here? America might truly be the greatest country on earth. It may be the largest super power that the world has ever known. But it is also the most expensive country the world has ever known. Operating the U.S. government and the governments of the individual states is expensive. How expensive is it?

The math here isn't complex. We simply look at how much the government spends doing all of the things it does --- and that gives us the price of everything. In the current fiscal year, that will cost about $3.5 trillion dollars. However, the total revenue of the federal government (from taxes, fees, etc.) is only about $2.3 trillion dollars. This leaves us with a federal budget deficit of about $1.2 trillion dollars.

So think about it this way. America the beautiful is about $1.2 trillion more expensive than we thought it would be this year. So if our politicians threw away the tax code and just sent everyone a bill for their fair share of the cost to be America, each of us (every man, woman and child) would get an invoice for about $4,500 this year ... on top of the taxes that we have already paid! So nobody gets a tax refund. Everyone gets an additional tax bill of $4,500. And it's due immediately. This is how you should think about this.

The story is worse though. Because the government didn't do a "true up" and send us each an additional tax bill last year or the year before, or the year before and so on, the cumulative deficit (i.e., national debt) now adds up to more than $14.2 trillion dollars. So if our politicians threw away the tax doe and just sent everyone a bill for their fair share of the cost to be America, each of us (every man, woman and child) would get an invoice for about $47,300 this year ... on top of the taxes that we have already paid! So nobody gets a refund. Everyone gets an additional tax bill of $47,300. And it's due immediately. This is how you should think about this.

We've had presidents promise, "No new taxes!" And we've had politicians and so-called experts calling for spending reductions. But the oddest thing is that no one has just said, "Look America. Being America is an expensive proposition. What with aging baby boomers going onto Social Security, the war against terrorism, the wars in Iraq and Afghanistan, the aging infrastructure, the program commitments that we've made to everything from national parks to the arts to single mothers to the unemployed to airline security ... it's all gotten terribly expensive. None of us knew it would be this expensive to be America, the land of the free and the home of the brave. But it is. And we have got to all knuckle under and pay for it."

Why isn't anyone having this conversation? Isn't that what sane, rational people would do? I imagine if my wife kept spending and spending and I was borrowing to pay the bills and digging ever deeper into debt --- then we'd have that conversation. I'd say something like, "Look honey, as much as I love and admire you and all that you're doing, the truth is that we cannot afford to live like we do. We can't afford to be as generous as we are. So we have two options. And the good news is, we can do both of them. But we at least have to do one of them. First, we can make more money to fund this expensive lifestyle. Second, we can stop living such an expensive life. So what will it be?"

Let's face it, this is the conversation that Americans need to be having right now. And we need to have it with both our federal and state government leaders. The likely answer is that we need to increase taxes and reduce spending. But not doing either is not an option. We are on an unsustainable road here. It is the proverbial elephant in the room. Are you ready to talk about it?

American Challenges

With all the people marching in the streets around the world, trying to get their government leaders' attention, I'm wondering if Americans ought to join in. After all, there are some things we'd like to call our government's leaders' attention to. And for the life of me, I cannot understand how the politicians that we elect in Washington, DC can wander around acting as if life is normal when we have massive threats to the sovereignty of our country looming over our heads. Call me a pessimist, but some of these things just have to be addressed. Now.

Let's start with the national debt. As of this week, it stands at $14,123,589,307,190.50. If we divide that by the approximately 300 million people that comprise the United States of America, it equates to about $47,078.63 for every man, woman and child alive today. How many people live in your household? Multiply that times this amount and you can see what your personal share of the burden is.

Of course it is the largest national debt number ever known to any state in the history of the world. But if that's not an attention getter, there are more practical aspects to this dilemma. For example, the current interest expense on this national debt is equal to about 10% of all government spending. Said differently, 10% of all the money the government spends is being used to pay interest on the national debt.

Now keep in mind that what our government spends is not equal to what you pay in taxes. So this 10% number? It's considerably more than the amount you pay in taxes. In fact, the government will spend, just this year alone, about $1.5 trillion more than it will receive in tax revenues. So just like the cartoon, we really are borrowing from our MasterCard to make the payments on our Visa card!

The U.S. faces two huge problems right now that really are linked. Our unemployment rate is hovering at about 9.4%. But once you add in those who want full time work but can find only part-time jobs, it is almost twice that (or about 18%). Job creation is not even keeping pace with the rise in population. And the budget deficit is running at almost 10% of gross domestic product (GDP). What that means is that the amount of money our government needs to borrow this year to keep the lights on is about 10% of all the money that will be made in the whole country this year.

But the first couple years of Obama's presidency, he and his administration largely focused on health care reform. Is that really the most seriously pressing issue? I don't think so. Now Obama referred to our currently dilemma (i.e., lack of innovation, lack of progress, etc.) as a "Sputnik moment." He was recalling the time back in 1957 when the U.S. realized that Russia had just out done us on the space program. So we surged forward with major investments in infrastructure, education, space exploration, etc.

And Obama wants to call our nation to do the same now ... surge forward with massive investments to ensure that America remains the leading super power globally. The only problem is that back in 1957, the U.S. government had piles of cash to spend on catching up. Now it has none. In fact, we owe everybody and can't even maintain our mediocrity without borrowing heavily from both our friends and our enemies in the world.

Perhaps the thing that disappoints me most about how our government leaders are failing us is that they are allowing Americans to continue living in denial. Just once I'd like to see a politician go on national TV and tell us that we have to pay more taxes. A lot more. These freedoms that we all hold so dear? This country that we're all convinced is the greatest on earth? It turns out they are considerably more expensive than anyone thought.

I love the United States. Perhaps it is the greatest country on earth. But frankly I can't enjoy something nearly so much if I don't own it. And Americans are fast losing our ownership of these freedoms and riches that we hold so dear. Unless we pony up and start paying a lot more taxes than we're paying now, we could lose everything that we hold so dear. It'll be foreclosed on by our creditors. Talk about a foreclosure crisis!

The first step is for Americans to get educated. It's clear (at least to me) that our government and its leaders aren't willing to tell us the truth about the situation at hand. Fortunately Peter Peterson has plowed a bunch of his wealth into a foundation that is dedicated to educating us, equipping us and calling us to action. You can check it out and join the cause at http://www.pgpf.org/.

I urge you, if you really love this country and value our freedoms, then go get the facts. Find out how expensive this way of life really is. And let's start having a national dialogue on how we're going to pay for it.