Bankrupting of America

If you think the current mortgage-related sub-prime meltdown has been bad, you haven't seen anything yet. The current state of the federal government's finances looks suspiciously like the mortgage sub-prime mess. We need to learn from the lessons of the smaller crisis in order to prevent an even bigger one. First, the mortgage-related sub-prime problem was caused in part by a disconnect between those who benefited from issuing the loans and those who bore the risk. The same situation exists with the federal government's finances. Today's taxpayers benefit from our current high-spend, low-tax, "mortgage the future" practices. Tomorrow's taxpayers will pay the price and bear the burden. Second, mortgage sub-prime was facilitated by a lack of transparency about the related risks, both in connection with home borrowers and with investors in mortgage-backed securities. This is also the case with the federal government's finances. The government is in a roughly $56,400,000,000,000 financial hole that is growing by $2 trillion to $3 trillion every year nothing is done to address it. These are just two of the disturbing statistics in "The State of the Union's Finances", a publication by the nonpartisan Peter G. Peterson Foundation, which can be found at www.pgpf.org. Third, Bear Stearns found out the hard way what price you can pay when you lose the confidence of your lenders and wind up in an escalating negative cash-flow position. Investors in mortgage-backed securities also found out that a AAA rating doesn't mean what it used to. The federal government is already experiencing a negative cash flow for Medicare, and Social Security will go negative within a decade. These negative cash flows will pick up dramatically when "baby boomers" retire in big numbers. Finally, with mortgage sub-prime, corporate and government risk-management devices failed to kick in and prevent a crisis. Today, too many elected officials are standing by and doing nothing to defuse the ticking time bomb associated with our government's finances. What are they waiting for--a crisis? When will Washington see the writing on the wall and start taking steps to reverse our deteriorating financial condition? Will our next President have the courage to talk straight and make tough choices in order to ensure that our collective future is better than our past? We can't afford to wait until this super sub-prime challenge boils into a crisis that will result in severe hardship for tens of millions of Americans. Hopefully, we'll get some real leadership on this issue soon.