The Super-Hegemon Bleeds Red Ink
A child born in America today is
$124,000 in debt the moment he draws his first breath.
The newborn`s inherited debt grows daily. Upon reaching
working age, an enormous debt awaits.
How does a newborn get into debt
prior to having a mortgage, credit card and car payment?
Easy. Government assigns each newborn child a share of
its debt. $24,000 is the newborn`s share of the
accumulated $7 trillion federal debt. $100,000 is the
newborn`s share of unfunded Social Security, Medicare
and veterans` health care benefits.
Unlike you and me, government
doesn`t care how deeply it goes into debt, because it
has the power to pass its debt on to taxpayers. The
theoretical limit to government debt is reached when
service on the debt requires such a large percentage of
national income that the population cannot reproduce.
US Comptroller General David M.
Walker would prefer for government to get its spending
and its accounting under control and not test how close
it can come to the theoretical limit. Last month
Mr. Walker told the National Press Club that for the
sixth consecutive year the General Accounting Office
“was unable to express an opinion as to whether the US
Government`s consolidated financial statements were
“The bottom line,” said Mr.
that the federal government`s current financial
statements and annual reports do not give policymakers
and the American people an adequate picture of our
government`s overall performance and true financial
condition. This is a serious issue. As Thomas Jefferson
noted, an informed electorate is the basis for a
sound democracy. But how can the American people and
their elected officials make sound decisions if they
aren`t given timely, accurate and useful information?”
text in PDF.]
Congress and the
Securities and Exchange Commission were quick to ask
that question about private business when the
Enron and Worldcom accounting scandals came to
light. Government overreacted to the scandals by passing
the ill-considered Sarbanes-Oxley act.
This disastrous piece of
criminalizes accounting mistakes. In order to
prevent top executives from being imprisoned because of
accounting error, US companies are forced to spend
huge sums, both as upfront costs and ongoing operating
expenses, to establish internal auditing systems in
addition to the external audits.
The costs of complying with this
legislation greatly exceed any conceivable measure of
the losses from accounting scandals.
The higher expenses will reduce
taxable earnings and thus contribute to the buildup of
The President of the US and the
Director of the Office of Management and Budget would be
in prison right now if government was
subject to the same accounting rules and punishments
as private business.
However, what happens to taxpayers`
money is not considered important. Government turns a
blind eye to its own malfeasance and focuses only on
what happens to investors` money.
Mr. Walker notes that as bad as it
is, our per capita debt burden is about to become
immeasurably worse. “In less than 10 years, the US
will be hit by a huge demographic tidal wave [aging
population] that is not expected to ever recede! This
is unprecedented in the history of our nation.”
The US tax burden is already so
high that Americans are choosing to have fewer children.
Thus, the government`s red ink and unfunded liabilities
are growing relative to the population.
The outlook might be worse than
even Mr. Walker realizes. The two-year cost in red ink
of the US invasion of Iraq is $150-200 billion. The Bush
administration has repeatedly declared that a long
occupation will be required in order to remake Iraq in
the US image.
Moreover, Iraq is merely the down
payment on the Bush administration`s plans to
reconstruct the entire Muslim Middle East.
Neoconservative Bush administration officials are
working with Israel to
spread the war into Syria, Lebanon and Iran. If they
succeed in their intentions, taxpayers will be facing
near term costs of $1 trillion at a time when the annual
budget deficit is already $500 billion.
Not even the US can finance a
budget deficit of $1.5 trillion. Wider war means
crushing taxation for you and me.
At the same time, the US is losing
millions of its best jobs to foreigners. Many US
corporations have relocated manufacturing operations
offshore. Currently, millions of high-tech knowledge
jobs are slated to be shipped out to India, China and
When the jobs leave, so do the
incomes and tax revenues.
Last month the US economy managed
to eke out a few
new private sector jobs for the first time in two or
three years. The jobs are low-paying ones in retail
trade, temporary help, and building construction. These
jobs do not pay incomes large enough to bear the federal
The neoconservative fantasy that
the US is a super-hegemon constrained by nothing but its
own will is a dangerous delusion for a country on the
path to bankruptcy.
Paul Craig Roberts is the author with Lawrence M.
The Tyranny of Good Intentions : How Prosecutors and
Bureaucrats Are Trampling the Constitution in the Name
of Justice. Click
here for Peter Brimelow`s
Forbes Magazine interview with Roberts about the
recent epidemic of prosecutorial misconduct.