You've heard the numbers. At the end of 2009, our national debt was $7.5 trillion. That means today, each American family's share of the debt is about $115,000. If this President's budget becomes law, in ten years our debt will exceed $20 trillion and each family will owe around $200,000. Interest payments will have to quadruple during the next decade. With more of our tax dollars disappearing to debt service, Americans will be paying more and getting less.
Yet Americans are now learning that it isn't just our profligate politicians that we have to foot the bill for.
The Greek government, like those of most developed nations, has been living well beyond its means. In 2009, Greece ran a one year deficit of 13.6 percent of GDP and total debt reached 115 percent of GDP. Recognizing that there was no end to Greece's borrowing and over-spending, creditors became nervous about the government's ability to pay back the loans. Greece's debt rating was reduced to “junk” and interest rates soared, which made Greek budget problems even worse. Greece has been trying to cut spending and curtail benefits. Appallingly, the public has been rioting in response.
The situation in Greece should be nothing more than a “teachable” moment for the United States. Greece provides a real world example of what happens when a government consistently spends more than it takes in and promises its citizenry more benefits than the country can afford.
Unfortunately, however, the United States isn't just previewing our future without reform. Greece's problems have become the world's problems, and therefore the United States' problems. The international community has pledged aid to Greece, which means that the American taxpayers will face a steep bill.
To help prevent Greek default, the International Monetary Fund (IMF) plans to provide Greece $39 billion. Given that U.S. taxpayers provide 17 percent of the IMF's money, Americans can expect to hand over about $6.6 billion to the Greeks.
That's relatively minor compared to the total scope of the federal budget. Yet the precedent is important. How much more will U.S. taxpayers have to spend on other European bailouts? The IMF is also expected to contribute $321 billion to a fund designed to address future debt crises in Europe. If the U.S. has to pay 17 percent of that bill, taxpayers will be on the hook for another $55 billion.
In other words, to help alleviate the debt crises of European countries, Americans may end up spending in the neighborhood of $60 billion. To put that in perspective, corporate income taxes are expected to raise about $157 billion this year. That means that more than one third of corporate tax receipts may be sent overseas to prop up nations who have allowed their governments' to rack up debt even more irresponsibly than ours has. That $60 billion could be used to reduce corporate tax rates by a third, which would create jobs, make American companies more competitive, and grow the economy. But instead that money will be sent to countries that smugly lecture Americans about the superiority of their system of government and way of life.
To pay off Europe's debt, America will borrow more. Yet if our government continues its own spending spree, creating new entitlements at home and giving away more taxpayer dollars abroad, the United States will face a debt crisis of our own. In the end, who will bail us out?
No one will. And each American family will pay the price. That price may be higher taxes or inflation, which will erode the value of savings and income. But ultimately our debt will come due and it will be American citizens who have to pay the considerable bill.
Americans are generous people. When tragedy strikes, Americans respond. It's not just our government that sends money to countries or regions devastated by natural disasters. Individual citizens send their hard-earned money to help those suffering in far-away lands. The Congressional Research Service estimates that in 2005, individual Americans gave away $1.5 billion for tsunami relief and $40 million for Pakistani earthquake relief, in addition to $4.2 billion to help the victims of Hurricane Katrina.
Greece has not been struck by natural disaster. This economic calamity was created by the Greek government and was entirely predictable. American taxpayers shouldn't be forced to bailout profligate countries whose citizens recoil from working passed age 53. Countries should have to live with the consequences of the decisions our elected leaders make. And Americans should all pay attention, because we will have some very unpleasant consequences of our own if our government continues on the current course of overspending.