The United States should be the most prosperous country in the world. Our system of government is designed to provide the freedom for its citizens to pursue their dreams. At one time, this new found freedom created fertile ground resulting in unparalleled inventions, improved productivity, technology advances, state-of-the-art education, and leaps forward in the quality of living. Somehow, however, our level of affluence began to drastically decline. With a land rich with natural resources, a government that protects freedom, and the unmatched military power and respect our country enjoys, this is profoundly paradoxical.

Somehow, we managed to dig ourselves into a pit. We allowed ourselves to be lured into believing philosophies that allowed us to rationalize away our common sense. We hid ourselves from reality, from those values that made us so successful in the past.

Instead of reducing the "nice to have" programs, and reengineering essential services, the federal government proceeds to squander our money. Federal departments and agencies are like habitual welfare recipients. Their hand is always open asking for more money. They over-exaggerate their resource needs. Consequently, these departments and agencies have become bloated, and so bureaucratic that very little real work gets accomplished. Federal managers worry less than ever about mission and more about personal careers. The key to success quick promotion in the federal sector is a silver tongue and the willingness to compromise everything. Costs can be reduced by 50 - 70% in all federal departments and agencies while simultaneously improving true performance several fold. The key is true management know-how and sincere desire. Let us take a closer look at some of our economic quandaries.

Debt

One of the biggest economic curses confronting our country is our incomprehensible debt burden. Ross Perot stimulated thinking by asking, "after going in to so much debt, what do we have to show?" He reasoned with that type of investment, we should have the best schools, infrastructure, legal system, schools, and health care system that money can buy. Somehow, we have the opposite. How did we allow ourselves to be enticed into uncontrolled and unproductive spending?

Today the total federal debt is about 5.3 trillion dollars. When the total federal debt is divided by the total number of U.S. citizens, each man, woman and child owes around is $19,878.16.dollars. How did we get in this predicament?

Interest

Another not so obvious calamity associated with debt is the pernicious interest payment. Interest is a cruel enemy. It deprives our country of new opportunities and a brighter future. It works against the borrower each and every day. It knows no rest and knows no mercy. Currently, sixteen cents of every dollar of federal revenue, is spent to service the debt. In other words, sixteen part of the federal revenue is thrown away. Still, we continue to manage the country at a deficit and the debt continues to mount up.

Debt, Deficit and Interest

Let us review past trends and future federal debt, deficit, and interest projections derived from the "President's Private Sector Survey on Cost Control."

These future trends are not realistic - since bankruptcy and total collapse would occur well before 2010. However, these projections were based on the past trends - or the path we were headed on. Only the threat of collapse forced us to make some change - which is still a far cry from what is needed.

We need a budget surplus, not a deficit, so we can begin pay off the debt. Creating a budget surplus will require tremendous cuts. "Nice to have" programs must be slashed or eliminated. Even essential government services such as defense, justice, and education will need to be radically reengineered to become both more effective and efficient. The reengineering know-how exists. We need to simply muster the determination to change and draw on expertise and the input of the American people to do the job.

Federal Debt as Share of GDP 

Congressional Budget Office (CBO) projections indicate that, under current fiscal policies, total federal revenue as a share of GDP will decline from 18.9% in 1995 to about 18.5% in 2001, and will remain at that level through 2006. Over this period, the only revenue category expected to pick up as a share of national output is the individual income tax (8.2% to 8.7%). Payroll taxes should hold steady at around 6.6%, while corporate taxes and excise and other taxes are seen as edging down. These trends reflect a continuation of those observed in the past, except for payroll tax revenues, whose share of GDP has increased consistently over the last four decades.

The upward trend in projected federal spending continues to be dominated by increased mandatory outlays. Excluding offsetting receipts, mandatory spending is expected to grow from 10.3% of GDP in 1995 to 12.9% in 2006, mainly as a result of increased health care costs. Medicare's share of national output is seen as rising 1.3 percentage points over the next decade, while Medicaid is projected to expand 0.8 percentage point. In contrast, the CBO anticipates net interest outlays will remain unchanged, while defense and nondefense discretionary spending are each expected to fall about 1.0 percentage point relative to output.

As a result, the baseline federal deficit is on course to jump from 2.3% of GDP in 1995 to 3.3% in 2006. However, despite the attention the deficit receives in the media and on the campaign trail, what the government spends our money on and how it taxes us to pay for that spending are more important than the size of the overall deficit. 17

Entitlement Spending - On the Incline

In 1992, 52.8 percent of the revenue was dispersed as payment to individuals, through entitlement programs such as Social Security, Medicare, and Medicaid. In 1940, 17.5 percent of total outlays went out as payments for individuals. In 1990, social security comprised twenty percent of total outlays. In 1950, it comprised two percent. In 1990, income security comprised fourteen percent of total outlays. In 1950 it was ten percent. Entitlement are out of control. In large measure entitlement programs have created a reliance on the government. Ironically, the rest of the world is discovering that government controlled programs create little and too often lead to crippling and almost irreparable problems.

Let's review past social welfare expenditures or entitlement trends:

The Institute for Policy Innovation projects that by the year 2020, that entitlement will be $1.8 trillion dollars.

Other Important Indicators Show Ingrained Problems

Total Federal Government Obligation

If our economy does start to crumble, the full extent of the possible damage is hard to project. The economy is built with thin thread that could snap for a number of reasons. One major concern is total obligations of the United States government are around $15 trillion dollars. The federal government protects savings and loans, pension funds, banks, home mortgages, and more.

Trade Balance

In 1970 the United States had a merchandise trade balance of 2.7 billion dollars. The balance continued to decline at an alarming rate until by 1986 it had plummeted to 152.7 billion dollar trade deficit. Although the trade balance has slowly gotten better, we still have a long ways to go. In 1992 we still has a trade deficit of 84.3 billion dollars.

Investment in the Future

From 1980 to 1989, Japan invested 16% of its gross domestic produced in its future. Germany invested 8%. The United States on the other hand only invested 4.5%.

Corporate Debt Per Employee

In 1950, corporate debt per employee averaged around $10,000 dollars. By 1990 that average shot up to $23,000 dollars.

Personal Savings Rate of U.S. Citizens

The personal savings rates in Japan is around 18%. In Germany it is around 15%. In the United States it is only 4.1%.

Rate of Bankruptcy

In 1950 approximately 8,000 companies filed for bankruptcy. In 1960 the number jumped up to around 16,000 and by 1980 it had skyrocketed up to 63,500.