Bailouts, stimulus, tax cuts, deficits.... just how is all of this going to be paid back? Or is that even in the plan?
Everyone is going to write a check to the federal government for $40,000 next year once the economy is back into full swing. Of course, if you have a family of four, you'll have to make the check out for $160,000. That is how much this debt is costing us. In real terms, it will cost us around $600 billion or so just to pay the interest.
The way to reduce the deficit in the long term is to cut spending to the point that we are not borrowing much if at all, and to allow the economy to grow while we continue to pay the interest. If the economy doubles in size over twenty-five years and the debt has not been increased, then it would effectively cut the debt by around 70%.
The real problem is cutting the spending. We have fallen into a rut of spending more than we can afford. At some point, it has to stop. On top of that, we are facing enormous increases in SS and Medicare spending. Both of those programs will have to be revamped in order to avoid draconian tax increases on everyone.
To add even more difficulty to our long term debt problems is the fact that our population is not increasing at the rate it has over the last 50 years, and the decline in the rate of population increase is likely to slow even more in the future. It was easy to greatly expand our economy over the past 50 years because we had a population explosion (baby boomers). We are not likely to see this type of population explosion again, nor is seeing one in our overall best interests as we are already pushing the limits of our natural resources.
The challenges we face long term are monumental, and that is not an exaggeration. We are going to need leaders who actually give a damn about our long term prosperity over their own power trips, and it's going to take people with great philosophical differences to come together and work together if we want any serious solutions to be found.
The alternative will be an overall collapse of our economy and a dramatic drop in our standard of living. This is not likely to affect us but much more likely to affect our children, grandchildren, and those who follow.
Actually, when I said the economy needed to double in 25 years, I meant to say that it would double twice in 25 years.