Today is Halloween, the day that millions of Americans will pretend that they are scaring one another. Yet this Halloween could actually turn out to be truly scary, because on or about this day, a genuinely frightening economic milestone will be reached: our national debt will equal the size of the U.S. economy.
Yes, our debt, which has passed $15 trillion and continues to mount, now equals 100% of gross domestic product (GDP), or the sum of everything we produce annually.
This marks a tipping point for America.
When an individual’s debt is too high, they either default or claim bankruptcy, as millions of Americans have done in the past two years during the economic slowdown.
The United States of America, unlike its European counterparts, has no one to bail us out.
Indeed, the “full faith and credit of the United States,” only has meaning for as long as our creditors (foreign nations, primarily China, hold more than 40 percent of our debt) believe we can pay it back.
Global markets took confidence last week when the major European banks agree to write off some of Greece’s debt, which approached 150 percent of its GDP. But Greece had the European Union upon which to fall back.
As an individual or organization’s debt increases, a point comes when the interest on the debt outpaces its ability to pay it back – an economic point of no return. America may soon reach this point. The 100% debt-to-GDP ratio threshold is symbolic, but history shows that when that ratio gets much higher, an economy not only can collapse, it can suddenly become almost incapable of recovery.
Without a combination of serious entitlement reform, drastic domestic spending reductions and explosive economic growth, the 21st century may cease to be an American century, and our unparalleled military and economic global leadership may end.
The American dream has always been that if you worked hard and played by the rules, that you could achieve a life of real independence. Each generation of Americans has also believed that the next generation will inherit a country with greater opportunity than the current generation.
On our current path, our generation will hand off a nation of less opportunity and less promise than what we inherited.
Simply put, our debt threatens the very future of America.
Due to irresponsible spending by Republicans in the mid-late 1990s and early 2000s, followed by massive increases in domestic spending and a punishing tax and regulatory environment ushered in by President Obama and the Democrats, we are in the perilous position of today.
If the current generation wishes to save America, we must:
• End the bailouts
• Pass a strong balanced budget amendment
• Reform the tax code for a system which is broader, fairer and flatter, encouraging economic growth
• Roll back destructive regulation which is hampering private sector job creation
• Reform our unaffordable entitlement system to keep promises to current and near term retirees and adapt to a new, portable system for younger workers
• End any current or future attempts to provide economic “stimulus” through massive deficit spending
• Agree to a path to not just balancing the budget, but paying off our national debt – in a generation
The political games and fear-mongering must end. America’s very survival is on the line. That’s why this Halloween is the scariest of my lifetime.
Colin Hanna is president of Let Freedom Ring, a Pennsylvania-based public policy organization.