As you know, our country is at a critical juncture. Growth has slowed to a crawl. Fourteen million Americans are unemployed, and three million have stopped looking for work. We are saving nothing and investing next to nothing.
Last year’s national saving rate was 0.1 percent, and our net domestic investment rate was 4.4 percent. Saving nothing means we have nothing to invest in our country. Those investing in our country are foreigners, which explains our huge current account deficit. It’s easy to blame foreigners for our problems, but without their investment, our net domestic investment rate would also be 0.1 percent.
Most Americans have experienced no growth in their real take home pay in decades. Those who are doing well are doing better, with income and wealth growing more unequal over time. And our government is broke. Based on the Congressional Budget Office’s latest projections, the fiscal gap separating the present value of projected non-interest spending plus the official debt and the present value of projected taxes totals $211 trillion.
This is the mountain of obligations we ignore while focusing on the $10.3 trillion “molehill” of official debt held by the public. Decades of Enron-style accounting has permitted both parties to keep the vast majority of the government’s debts off the books.
Our fiscal gap is 14 times GDP — a larger ratio than prevails in Greece or, it appears, any other developed country. Eliminating the fiscal gap without structural reform would require either an immediate and permanent 64 percent increase in all federal taxes or a 40 percent cut in all federal non-interest spending. Delaying such adjustments leaves an even bigger bill for our children.