A while back, I had read stories of the real estate housing bubble in Japan that crashed in the mid-1990s. Prices were so high that, for a brief while some families were signing up for two- or three-generation mortgages. These were mortgages with 50 to 100 year terms that were signed by parents and their teenage or adult child.
Home prices have dropped by more than half – in some cases by two thirds – but these families are stuck. Japanese banks can foreclose and still go after the borrower for the money. Filing for bankruptcy is considered very shameful in Japan. Especially stuck is the now-adult child, who may have signed the loan documents while still a minor.
I tell this story because…
If you ask the average American, they will tell you that they would never want to saddle their young children with the financial burden of taking care of them both now and into their old age. They want the best for their children. For them to have a brighter future – not to be crippled with onerous debt placed on them by parents. For them, it would be a shameful deed to bind their children into a lifetime of debt slavery.
And yet that is what the previous generations have done to today’s children and to future generations. Debt is a claim on future income, and our country citizens has laid a crippling claim to the productive efforts of future generations. All in order to fund all sorts of past, present-day, and future enjoyments and priorities. I do not say this lightly, but it is true.
We borrowed trillions and spent it all already. Our nation officially owes so much money – at present almost $15 trillion – that it would take at least eight full years of ALL Federal government revenues spent on nothing else but debt service (both interest and principal) in order to extinguish the national debt. No money for defense, no government services, nothing.
That’s assuming there is no more additional taking on of debt of any kind whatsoever. And I’m not even counting the unfunded portion of Social Security, Medicare, and other liabilities, which are even bigger and would more than quadruple the number of years.
We ALREADY spend $400 billion per year in interest payments alone on the National Debt. We owe so much and spend so much that, on top of our borrowings, we borrow to pay that $400 billion in interest just like an irresponsible person would use a credit card to pay interest on another credit card. (See also: “How To Explain The National Debt To Friends And Family“.)
And we’ve been lucky! Yes we are, because right now we only play $400 billion of our estimated $2.1 trillion in annual Federal revenue on interest payments. As the National Debt grows in size over the years, adding at least a trillion or more per year over the next ten years, interest rates likely will rise from the current average 2.5% to the more typical long-term average of 5.5% (investors may want even more, due to the risks). So we may very well see interest payments alone double to $800 billion within 5 years!
The government will soon have to make drastic cuts in spending. It will happen whether we want it to or not. With interest payments that will soon suck up 40% of Federal income, major cuts in government spending and social services, a National Debt that will be impossible to pay off, and entitlement promises that are even more impossible… This is a terrible, terrible burden to place on our children.
It would be as if you or I had signed our little kids up to indentured servitude contracts, to have ripped away from them a large, significant, and substantial sum out of their income each year for their rest of their lives – all in order to pay for our current consumption lifestyle and our eventual retirement.
If you knew of such a person who did that to their children, I bet your reaction towards that person might range from pity to disgust to outright hatred. Wouldn’t you, if you knew a neighbor who signed their children’s future away like that?
That is how many younger Americans feel about the previous generations’ politicians (on both sides) and the lies they sold to an American public that has always known, deep down, what the truth really was… But wanted the easy, money-greased, low-tax way out.
This is the shameful, impossible legacy of debt left to us, a diminished future that we Americans of today and our children are facing. We are fast approaching that point when our nation’s debt problems can no longer be pushed into the future.