Can the U.S. avoid bankruptcy?

The Congress doesn’t cut spending and balance the budget because they can’t. Not even if they remove every department and employee including the military.


So says Hal Mason in the shocking accompanying video titled, “United States Budget Dilemma.”

President Obama, in his proposed Fiscal Year 2013 budget, would spend $3.8 trillion. But the federal government will only collect $2.5 trillion in taxes, resulting in a deficit of $1.3 trillion. That $1.3 trillion is an amount larger than Congress appropriates to operate the federal budget.

The problem is easily stated; spending on mandatory programs and interest is greater than taxes collected. According to Mason, in order to balance the budget, Congress would have to raise taxes 50 percent or eliminate the federal government.

Watch the “United States Budget Dilemma” video:

Congress has failed to adequately address the problem by continuing raise the debt limit and borrow more and more until we now have a $16 Trillion national debt. $16 Trillion exceeds 100 percent of the nation’s gross domestic product and is 25 percent of the world’s gross domestic product. Worse the Democrat-controlled Senate hasn’t even passed a budget in over three years.

Back in February 2011, I wrote “Just How broke are we?” about Duquesne University Economics Professor Antony Davies’ analysis about the debt and unfunded obligations of the federal government totaling more than $64 Trillion. I asked Professor Davies about Molson’s video. He said the figures in the video match his calculations, which are straightforward. Professor Davies agrees, mandatory spending currently exceeds federal tax revenues, so shutting down the entirety of what most people think of as “the government” will still not balance the budget.


Professor Davies also explained that if current trends continue the U.S. will become operationally bankrupt in 2037 and will be actually bankrupt in 2047. And that ignores  the potential effects of ObamaCare.

Bankruptcy occurs when the annual interest on the debt equals federal revenue. At this
point, it becomes mathematically impossible for the government to avoid default.

Operational bankruptcy occurs when the annual interest on the debt equals federal
revenue less discretionary spending. At this point, it becomes impossible for the
government to fund anything other than mandatory spending (which includes welfare,
Medicare and Medicaid, Social Security, veterans services, and interest on the debt). Under
the Antideficiency Act, Federal agencies must cease operations (except in emergencies)
when they lack funding.

There is no easy answer to our budget dilemma. We must reform entitlements. As the Greek experience shows, any viable solution will be painful for everyone.


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