Before activating that switch, however, let's take one last look around us. The future is molded by the present. Where we are now will greatly affect where we are going to be.
MIRED IN DEBT
One of the most obvious characteristics of our present time is the extent to which Americans and their government have become mired in debt. Annual federal deficits have grown steadily since 1950, and the rate of growth is now in a vertical climb. It had taken 198 years for the federal government to borrow the first trillion dollars. Then, in just twelve years—mostly under the Reagan Administration—it borrowed another three trillion. By the end of 1995, after three years of the Clinton Administration, the debt had grown to about $5 trillion.
It is difficult to comprehend numbers of that size or to translate them into their effect upon each of us. $5 trillion represents about 80% of all the goods sold and all the services rendered in America throughout the entire year. If you had a stack of $100 bills 40 inches high, you would be a millionaire. $5 trillion would rise 3,350 miles into space.
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THE CREATURE FROM JEKYLL ISLAND
By 1993, net interest payments on that debt were running $214
billion per year. That consumed about 14% of all federal revenue.
It now represents the government's largest single expense; greater than defense; larger than the combined cost of the departments of Agriculture, Education, Energy, Housing and Urban Development, Interior, Justice, Labor, State, Transportation, and Veterans' Affairs.
These charges are not paid by the government; they are paid by you. You provide the money through taxes and inflation. The cost currently is about $4,500 for each family of four. All families pay through inflation but not all pay taxes. The cost to each taxpaying family, therefore, is higher. On average, over $5,000 is extracted from your family each year, not to provide government services or even to pay off previous debt. Nothing is produced by it, not even roads or government buildings. No welfare or medical benefits come out of it. No salaries are paid by it. The nation's standard of living is not raised by it. It does nothing except pay interest.
Furthermore, the interest is compounded, which means, even if the government were to completely stop its deficit spending, the total debt would continue to grow as a result of interest on that portion which already exists. In 1995, interest on the national debt was already consuming 57% of all the revenue collected by income taxes. At the present rate of expansion, it will consume 100% by the year 2010. That includes corporate taxes. Interest will consume 100% of our personal income taxes much sooner.
Amazing isn't it? Without interest on the national debt, we would save enough to reduce corporate taxes and eliminate personal income taxes altogether. Unfortunately, under present policies and programs, that is not going to happen, because Congress does not live within its income. Many expenses are paid, not from taxes, but from selling government bonds and going deeper into debt each year. So, even though we could save enough to eliminate personal income taxes, it would not be enough. The 1. The gross interest was running $300 billion. Some of that money, however, is paid to federal agencies which hold some of the debt, so it is a case of the government paying itself. Furthermore, the Federal Reserve returns to the Treasury some of the interest it receives—the amount left over after the cost of operating the system.
2. See Harry Figgie, Jr.,
DOOMSDAY MECHANISMS
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government would still go into the red to keep up its present life style. However, if a reduction in the size and scope of the bureaucracy were accomplished at the same time, then personal and corporate income taxes could be entirely eliminated, and the government would have an annual surplus.1
THE DOOMSDAY MECHANISM
Unfortunately, the locomotive is running in the opposite direction. The size of government is growing larger, not smaller. There are more people working for government than for all manufacturing companies in the private sector. There are more bank regulators than bankers, more farm-bureau workers than farmers, more welfare administrators than recipients. There are more citizens receiving government checks than there are paying income taxes.
By 1996, welfare benefits in 29 states were higher than the average secretary's wage; and in 6 states, they were more than the entry-level wage for computer programmers. When it is possible for people to vote on issues involving the transfer of wealth to themselves from others, the ballot box becomes a weapon with which the majority plunders the minority. That is the point of no return, the point where the doomsday mechanism begins to
accelerates until the system self-destructs. The plundered grow weary of carrying the load and eventually join the plunderers. The productive base of the economy diminishes further and further until only the state remains.
The doomsday mechanism is also operating within government itself. By 1992, more than half of all federal outlays went for what are called entitlements. Those are expenses—such as Medicare, Social Security, and government retirement programs—which are based on promises of future payments. Many of them are contractual obligations, and millions of people depend on them.
That does not mean they cannot be eliminated. For example, entitlements include $24 billion per year for food stamps. There is no contractual obligation to continue those, only political expediency. By now, most Americans have stood in grocery lines and 1. The federal government derives substantial revenue from sources other than income taxes, such as excise taxes and import taxes. These, plus occasional assessments to the states, were the only taxes which the founding fathers intended for the federal government. The arrangement worked well for 135 years until the income-tax was adopted in 1913.
