Winston Churchill once said "Americans will do the right thing-after they have exhausted all the alternatives."
That was many years ago, but it is just as true today, or is it? After enduring a week of Wienergate, I was not surprised that A.) the Congressman would attempt to keep his job; B.) The media would be entirely focused on the juicy details of the scandal when there are so many crucially important stories; C.) There were plenty of folks willing to downplay Mr. Wiener's deplorable behavior as no big deal.
Since Churchill's time, we have seen a decline in values to such an extent that I truly fear that now as the nation needs to make decisions about our growing debt, we will not be able to "do the right thing" in time to save our ourselves.
When we experience crisis, lessons can be learned, but are we willing to learn from the financial meltdown of 2008 in order to turn things around before we are again faced with a larger looming disaster?
Those that correctly predicted the past few market crashes are again sounding the warning bells of pending calamity, but is anybody listening? Are we so enthralled by Congressman Wiener's privates on Twitter that we fail to realize that we face a debt ceiling vote shortly that could literally shut our country down? This could lead to potential default on some of our obligations including entitlements. This past week, unfunded obligations for entitlement programs like social security, Medicare and federal employees retirement were revised upward from $56 trillion to over $61 trillion. If you combine the national debt currently over $14 trillion with these unfunded programs and subtracting the value of federal assets as of the end of the last fiscal year, the federal government has over $57 trillion in unfunded debt. This shortfall is 82 percent of the combined net worth of all U.S. households and nonprofit organizations. That includes savings, real estate, corporate stock, private businesses and all consumer durable goods. Simply, we could put everything that every citizen (including the wealthy) and nonprofits (like churches) have together and we would not come even close to covering our existing obligations.
Programs like the Affordable Care Act (Obamacare) are going to reduce payments for almost all services currently covered by Medicare by one half their level under prior law, with no provision to prevent current Medicare providers from defecting. Without doctors, hospitals or labs to provide care to Medicare beneficiaries, services could become scarce leading to long wait times and unpredictable costs. This could create huge problems for beneficiary's access to care and would lead to far higher costs than current projections, not to mention severe restrictions to certain types of care. If this is the type of legislation designed to reduce unfunded entitlement liability, I cannot see how and I have seen the CBO numbers. These are the current realities we face and with an election year looming, many financial experts along with yours truly have little to no hope that anything will be accomplished to rein in spending or curtail ballooning future unfunded obligations.
Back in 2008, we had a glimpse into the abyss and many were frightening into the realization that we must curtail risk, eliminate debt and properly regulate currently unregulated markets.
Flash forward to 2011, almost nothing has changed. Risk taking on Wall Street is back in fashion and the nation's debt load, the greatest threat facing investors and our nation today, has soared.
Bob Rodriguez, the mutual fund manager with the best record in the past 25 years correctly predicted the last two stock market crashes. He, along with a host of others that refuse to join the party of "the economy is recovering and everything is going to be fine," have said that if we do not start reducing debt levels by 2012, we face economic disaster that we cannot bail ourselves out of. Rodriguez argues that US debt as a percentage of GDP, currently reported at 64 percent, is massively underreported because of programs like Medicare and debt from Fannie Mae and Freddie Mac. If just those liabilities are factored in, our actual debt to GDP ratio is greater than 500 percent.
If nothing changes as I suspect it won't, it will be too late to do the right thing. As our debt balloons, lenders will start getting nervous about our ability to pay. That means higher interest rates, a larger slice of the pie will go to service debt leaving even less to pay entitlements and other unfunded liabilities. Markets operate on confidence and when you loose that, all alternatives are truly exhausted and Mr. Churchill's opinion will be obsolete.
We have to hope it does not come to that, but hope is not action. As voters, you must demand the nonsense stop now and those elected to represent us do the right thing and do it now regardless of how it reflects in the coming election. Apparently, some legislators have too much time to waste on Twitter.
• Carol Perry has been a Northern Nevada resident since 1983. You can reach her at carol_perry@world
net.att.net.