Our unfunded government liabilities are the real ticking timebomb and nothing is being done about it.
US is paying almost 1 trillion/yr in interest at present. This will increase.
FY22 givernment spent 6.27T, 1.38T more than revenue. Mandatory spending is 2/3s of the annual budget. More than half of the feral givernment budget is payment for people retirement and medical and servicing the interest on the debt.
Social Security (1.2T)(19%)(49M retirees)
Medicare ($839B)(13%);
Medicaid (724B)(11%)
Interest on debt (724B)(11%).
and
National defense (839B)(13%).
There’s 67% of the budget. Where do you want to start cutting? The deep state will never go away, never. Inflation only helps the givernment. Remember in good times, givernment increases in size and spends more than it takes in revenue. In bad times, givernment increases in size and spends more than it takes in revenue. The givernment is too big now to succeed.
The single biggest problem facing the world today is grossly excessive government spending. Again, it is not a tax issue, it is a spending issue. The total acknowledged on-the-books debt to the governments of the world is north of $220 Trillion. Unfunded liabilities are another $440 Trillion.
Total global wealth is $431 Trillion of which $93 Trillion is “government wealth.” As few governments publish an accurate Balance Sheet, and their Income Statements are suspect, take that $93 Trillion number with a few railroad cars off salt.
Note that all debt is fungible and until the borrower declares bankruptcy, liquid.
Off the $338 Trillion ($431T - $93T) of wealth that is privately held, two-thirds $225.3 Trillion) is Real Estate which is not fungible and is illiquid. Another $28.2 Trillion is other assets which are non-fungible and illiquid such as Plant and Equipment, Intellectual Property, or Corporate Goodwill. Therefore, only $84.5 Trillion of global private wealth is fungible and liquid.
While the $253.5 Trillion of non-fungible and illiquid assets are largely productive in the hands of their current owners, as anyone who has ever participated in a bankruptcy or going-out-of business proceedings can tell you, an immediate forced liquidation of assets typically yields around 10% of the book value.
Therefore, if the governments of the world were to seize all private wealth to pay off their debts, that would yield $109.9 Trillion ($84.5T of liquid assets, and $25.4T from the forced liquidation of illiquid assets). Again, assuming that the $93 Trillion of current government assets is a valid number and those assets are liquid, adding the $109.5 Trillion raised by seizing all private wealth, stlll leaves the governments of the world short at least $17.1 Trillion to pay off their $220 Trillion of acknowledged on-the-books debt.
Remember the United States Government went bankrupt running a legal, and previously highly profitable, brothel (the Mustang Ranch) in Nevada that it seized as part of a tax case.
As a direct result of the out of control government spending, inflation and interest rates will continue to rise. Soon and very soon, many of the world’s governments are going to default on their debt.
If your solution is to have the world’s economy “grow its way out of this,” realize that global government spending would have to be reduced from its current share of more than 20% of Gross World Product to less than 10%. Probably not going to happen peacefully.
In the United States, the most productive nation on earth, and also one of the most indebted, total government (Federal, State, and Local) spending accounts for 36.75% of Gross Domestic Product. We will not escape this, and it will hit this nation far harder than most.