The Decline and Approaching Fall of the U.S.

THE WAY THINGS ARE

The blame for the economic collapse of our country ultimately will fall at all of our feet.  But, to a large extent, it has its roots in a conspiracy of silence among presidential candidates and most members of Congress.  That silence is due to basic fear. .  . fear that if they confront the problem and honestly point out its severity to the American people, they may lose votes and elections.

—   Senator Warren Rudman, R-New Hampshire
Comments on the Debt and Deficits in the
Foreword in Bankruptcy 1995

The U.S. decline began in 1970.  It was hardly noticeable.  As the 70s progressed, the public debt began to rise.  It was accompanied by increased interest expense which rose faster than government receipts.  Although contributory, the growing interest expense as a percentage of receipts was not the crux of the problem.

In 1978, William E. Simon, Secretary of the U.S. Treasury 1974-1977, wrote a book, A Time for Truth, warning the American people of the suicidal fiscal course our country was following.  Storm warnings from other notable, knowledgeable, and highly respected persons were not far behind, but Congress and the public had deaf ears.

Figure 1-1 is a copy of the cover page of the September, 2001 issue of the Monthly Treasury Statement of Receipts and Outlays.  This issue is for fiscal year 2001, which ends on September 30 2001.  From this and statements for other years, the fiscal conditions of the government can be deduced.

In the 1960s, interest expense hovered around 11 percent; a number you, a family, a corporation, or the federal government could live with.     But the rising interest expense, which began in

1970, reached 57.9 percent in 1991.  Fed watchers thought the Armageddon was at hand.  Fortunately, the subsequent boom times with larger government receipts rescued the U.S., reducing this frightening number to 34.4 percent by 2001.  Chapter 5 discusses the Public Debt in some detail and data from 1960 through 2001 is provided.  It’s appalling to think that even now, one-third of the government's income goes to pay just interest expense.  Even so, this shocking interest expense is not the crux of the problem.

As interest expense was growing, so were the trust funds.  The trust funds are shown in Figure 1-2 which is a copy of Table 8 from the September 30^th, 2001 issue of the Monthly Treasury Statement of Receipts and Outlays.  By 1983, the trust funds had grown until they were gobbling up 50 percent of all government's receipts.  The tail began wagging the dog.  In 1993, trust funds receipts as a percent of all receipts had reached nearly 54 percent.  Meanwhile trust fund outlays as a percent of all outlays were rising and by 2001, over 46 cents of every dollar the government spent was coming from the trust funds. The Department of Defense is often thought of as being a big spender, but compared to the trust funds it is small potatoes.  When reference is made to all outlays by the government, it includes, in addition to the trust funds, the spending of the Office of the President, the Legislative Branch, the Judicial Branch, 14 department which includes Defense, and some 60 Administrations, Programs, Foundations, Commissions, Corporation, Boards, Services, Agencies, and what