The federal debt is now larger than Twenty Trillion Dollars.  That’s $124,000 per American, if you’re counting just the younger half of the population. The older half of the population has benefited from the growth of the debt—we paid lower taxes and got more services, for decades—and we won’t have to pay it back.  So it’s younger Americans who will bear the brunt, and they’re beginning to notice.

When interest rates get back up to normal levels, generations X, Y, and Z will have to pay annual interest on the federal debt of a trillion dollars a year.  We only collect about $3.3 trillion in taxes …. Bigger interest payments mean faster growth in the debt, which is already accelerating because of the soaring growth of entitlements.  Today 83% of the taxes we collect are spent on entitlements and other “Human Resources”. Sadly, less than a third of that entitlement spending is used to help the poor.

The Baby Boomers have been paying lots of tax, because they’ve been in their peak earning years.  Now they’re all retiring, and receiving benefits.  They will join Medicare, which is headed for serious trouble, and Social Security, which is in much better shape.  Still, if you look carefully at page 2 of your latest Social Security statement you’ll see the words:

“Your estimated benefits are based on current law … The law governing benefit amounts may change because, by 2034, the payroll taxes collected will be large enough to pay only about 79% of scheduled benefits.”

The Medicare trustees say that Medicare will run out of money in 12 years.  Sure, we can raise taxes on the top 1%, but they’re only 1% of the population.  You would need a million Americans, each paying a million dollars in tax to raise a trillion dollars, and that wouldn’t have been enough to cover the federal government’s health care outlays in 2016.  Two years from now, according to the White House Budget Office, you’ll need to levy million-dollar taxes on 1,277,000 people to cover those health care costs.

When JFK was president the top rate was 91%, and we collected less in tax than we are collecting now.   In fact, between 1936 and 1970 the top tax rate was always above 70%, but in all that span there were only four years in which we collected more tax, as a percentage of GDP, than we collect today.

The real problem is that we don’t actually have a budget process, because Congress doesn’t have to balance the budget.  That’s not true in our states, most of which have some sort of balanced-budget language in their constitutions;  they actually have to make choices in spending, and feel the pain of hard  decisions. Similarly, the constitutions of Switzerland, Germany, and Austria now have “debt brakes” that force politicians to pay down debt during economic expansions.

In the United States a balanced-budget amendment to the constitution passed the house in 1995, and came within a single vote of passing the senate.  In 1995 our debt was a quarter of today’s level.