An open letter to Government

I am very worried about the future of this country. I fear the future, not out self-interest, but for the well being of my three children. I’ve historically not been too interested in politics during my 48 years, but the current administration’s policies have energized me. I was further energized to write these comments after I read about the liabilities that have been incurred by various levels of government (federal, state, and local). These liabilities include “official amounts” per government accounting standards, as well as “off the books” liabilities. The total amount of official and unofficial debt amounted to $127 Trillion. This mountain of debt is disturbing. I think about what combination of tax increases and/or budget cuts that would be required to reduce this debt to a sustainable level (in terms of our ability to service the debt). Given that the top 5% of taxpayers already pay 60% of income taxes, we would need a broad based tax increase, or higher taxes on the top 5%. The latter course reminded me of a quote attributed to Margaret Thatcher – “The Problem with Socialism is that eventually you run out of other people’s money.”


I’ve also seen analysis that suggests that once you get to a Debt as a percentage of GDP level of 90%, you shave a full percentage point off of growth in GDP. With GDP running around $14-15 trillion, we are already there. Such an impact on the growth of the economy will not help with the unemployment problem, where over 9% of Americans are out of a job.

The pressure to do something about spending is complicated by the fact that the top 50% of taxpayers pay 97% of income taxes. What is the incentive of the bottom 50%, who pay the remaining 3% of income taxes to vote for candidates who espouse fiscal responsibility?

If we do not deal with these issues, ultimately, we will see a devaluation of the U.S. Dollar, higher interest rates (as creditors demand compensation for the weak currency, and further decline in the credit quality of U.S. Government bonds). However, right now, U.S. Government bonds are benefitting from a flight to quality given the turmoil in EU countries unsustainable debt and spending cycle. Clearly, we are headed in the same direction of the EU economies, in that government is too big, making promises that can’t be funded. Right now, we are able to finance those promises with debt, as U.S. government bonds are the “nicest house in a really bad neighborhood.”

Adding all of these issues together, I feel like I am standing on a train track while a high speed train is hurtling towards me and my family. What can I do? Is it possible that I am a fool for having saved for my kids’ college education, or saving for retirement, or saving for a rainy day? When those expenses come due, will my dollars be worth anything as a result of our governments’ fiscal irresponsibility?

As someone who was raised by “penny-pinchers,” who also wanted to provide for a quality education for their children, I am a saver. It’s in my DNA. However, with each passing day, I feel foolish for saving. It seems like our central bank is keeping rates low to encourage risk taking by investors. However, given the anti-free market policies of our current administration, it’s had to get too excited about taking on additional risk.

The current administration, despite having campaigned on platform that included respecting the Rule of Law, has turned into a bully. It started with banks (under President Bush), which were, in certain cases, bullied into accepting TARP funds, despite the fact that they didn’t want it and didn’t need it. Under Obama, the administration favored unions over secured bond holders at Chrysler. Then they denied white collar pensions at Delphi while preserving union penions. Then it spread to the health insurers, who are apparently seen by Obama as public utilities, not as profit seeking, shareholder own private entities. Now we have the President bullying BP into funding a “honey pot” of cash for spill victims. BP already said that they would cover these expenses, and if they did not, then the legal system would have made them. For a U.S. President to appoint himself Judge, Jury and Executioner worries me. If he can do this to a multi-national corporation, what protections do we have?

Put all of this together and I am very despondent about the America my children will inherit from the current generation.