In 2005, everything is going well for the Greek people. The economy is thriving and interest rates on government bonds are low. Politicians are not sounding the alarm.
“But several Cassandra senators looked at the demographics and the burden on the government and said, 'We have a problem,'” said federal economist Dan Mitchell.
Cassandra is a priestess in Greek mythology who is destined to make true prophecies.
Two years later, a financial crisis similar to the Great Depression in the United States hit Greece. The European country was allowed to borrow $146 billion from the International Monetary Fund and the European Union in exchange for harsh tax increases and spending cuts. This was one of the many bailouts Greece received. A 2015 report found the economy shrank by a quarter as Greeks faced job losses, pay cuts and erosion of social safety nets. Those who were able to leave the country did so.
Greece currently has the highest debt of all EU member states, accounting for 160.2% of GDP.
Mitchell said: “If Greece had had some responsible parliamentarians five or 10 years ago and taken responsible steps to slow the growth of the government… all of the economic and human damage could have been avoided.” said. interview. “I think the same situation applies to the United States now.”
Mitchell acknowledged that he doesn't know when the U.S. will hit a brick wall. It could be in two years, or it could be in 15 years. “But there is no question that we are heading in a dangerous direction,” he said.
A new poll by Main Street Economics, a nonpartisan organization that educates the public about fiscal responsibility, finds that more than 85% of Americans are worried about the national debt rising by $34.47 trillion (more than $100,000 per person). It turned out that he was suffering from anxiety and worries.
A poll of 1,000 U.S. voters found that 59% said they don't think lawmakers are doing enough to address the debt crisis, but policymakers are addressing the issue. Only one-third, or 34%, of voters thought so.
Les Rubin, founder and CEO of Main Street Economics, said in an interview with the Deseret News that the results show Americans understand the U.S. debt problem. “They don't understand exactly how they got here and how to resolve it,” he said. ”
Through this poll and their latest book, The Greatest Ponzi Scheme on Earth, which was released on March 15, Rubin and Mitchell hope to inform people about the Mitchell said he is trying to provide feedback to the owners.
Opinion polls showed that voters were most concerned about inflation, crime and war. However, the study found that the top three issues related to personal safety and security were “well associated with national debt.”
The U.S. General Accounting Office also warned in a recent blog post that unless the federal government corrects its “unsustainable” fiscal path, there will be “serious economic, national security, and social challenges.” According to CNN, the US government will pay $76 billion in debt interest in October 2023, up 77% from $43 billion in October 2022.
“I consider this a Ponzi scheme, because the only way to pay off the debt is to borrow more money,” Rubin said.
The poll asked voters which federal agency they would abolish, and 28% said the IRS was their first choice, followed by the Department of Commerce, overseas military bases and the Environmental Protection Agency.
“People have always hated having to pay taxes,” Mitchell joked, adding that dealing with the IRS isn't easy “whether it's a computer-generated notice of deficiency or an audit.” he added.
Additionally, he noted that the Biden administration's decision to provide an additional $80 billion to the IRS has garnered a lot of headlines, and polls show people are noticing. But specifically, he's not about the IRS. That is the fact that the United States is “becoming a welfare state on a European scale.''
Congress passed a $460 billion partial spending package last week, after relying on four stopgap bills last year to avert a government shutdown.
The Main Street Economics founder said from a 10,000-foot perspective, there are two areas where Congress must reform. The first is entitlement, which currently accounts for 70% of the budget and does not go through the annual appropriations process, Rubin said. “The other thing is the size of government. If you go back to what the Founding Fathers designed, our government has limits, and that's not what's happening today.”
Mitchell agreed, saying that saving the situation does not require severe budget cuts, but rather slowing spending growth.
“Bigger government proponents have been very successful in adding more to the federal leviathan,” Mitchell said. “What we're saying is, let's at least put the government on a diet.”
Some lawmakers share Rubin and Mitchell's concerns. Utah's Republican senators, Mike Lee and Mitt Romney, regularly speak out about their concerns about the growing national debt.
Lee previously told the Deseret News that the debt stems from spending issues, not revenue issues, and is a “deep concern for our nation's future economic stability and prosperity.”
In November 2023, Sen. Mitt Romney (R-Utah) and Sen. Joe Manchin (D-Va.) will be tasked with finding legislative solutions to stabilize and reduce debt. It was proposed that a committee be established.
The bipartisan commission will include 12 members of Congress and four outside experts. Reports and bills produced by the agency must be approved by a majority of the committee's elected officials, including at least three members from each party, according to a one-page fact sheet.
Rubin called Romney's bill “a step in the right direction,” but said it would be better to have an expert vote to avoid “getting into a political quagmire and not accomplishing anything.” he added.
Mitchell noted that models like the Secretary of Defense's Base Realignment and Closure Commission have been successful. Established after the end of the Cold War, the commission was responsible for the closure of 350 military installations, generating annual savings of $12 billion.
Politicians who own military bases and facilities fought against their closure. “But we all knew that the Cold War was over and the Pentagon was expanding tremendously…and it made sense to consolidate and close certain bases,” Mitchell said.
Rubin said the base realignment commission did not require politicians to vote and gave them cover, “so when they shut down bases in their districts, they could say, 'Well, my You could say, 'I didn't vote for it.'
Mitchell said politicians appointed to committees could also be a concern, especially if they are “big-spending populists like Biden and Trump.”
He admitted he felt pessimistic about the Finance Committee, but at least acknowledged that it would force Congress into a tough debate.
In their latest book, Rubin and Mitchell depict a dystopian outcome for the “debt bomb.” This nightmare scenario occurs when investors are no longer willing to buy bonds. If that happens, “there are several options, none of which are good,” Rubin said.
“Governments will probably start by printing money, which could lead to hyperinflation and ultimately fail,” Rubin says. “We're not talking about Greece or a small country that could be saved by the EU, we're talking about a big kahuna of who's going to save America.”
