On a periodic basis we do some posts that fall under the theme of “by the numbers.” Rather than trust what the American political class tells us about reality, we like to examine the real numbers and the real reality in the world to understand what is actually going on. Relying on politicians, and their cohorts in the media, to tell us what is reality is always a sucker bet. They have their own agendas and goals, usually centering around their needs and self-enrichment. So we need to look at the reality of the numbers to determine what is really going on.
Previous analyses of “by the numbers” can be accessed by entering the phrase in the search box above. We look at the numbers to truly find out how good, not likely, or bad, most likely, the American political class is doing in managing our tax dollars, protecting our freedoms, and resolving major issues that affect all of us.
1)Probably one of the scariest numbers in the country right now is the Federal government’s national debt which is quickly approaching $33,000,000,000,000.
That’s $33 trillion for those of you that do not want to count the zeroes. Let’s play with that number to see how scary it really is:
There are about 332 million people in the country today.
If each person equally contributed to paying off the national debt that would mean that each man, woman, and child would have to write a check for about $99,000.
Thus, a typical family of 4 would have to write a check for just under $400,000 to pay off the current debt, not going to happen.
Every year there about 161,000,000 individual file tax returns with the IRS.
Thus, a typical individual taxpayer would have to increase their payment to the IRS by about $206,000 to pay off the current national debt, not going to happen.
But how about we just let the richest people in the country pay off the debt, they can afford it, right?
According to the Wise Voter website, the United States has the most billionaires in the world with a total of 724 individuals holding a net worth of about $4.4 trillion.
If we could theoretically confiscate ALL of their assets and use the proceeds to pay down the current national debt we would pay off only about 13% of the debt.
Since we would never be able to do that, let's assume we forced every billionaire to donate 10% of their wealth to paying down the national debt, in which case we would only be paying off 1.3% of the current national debt.
There are rumors that Biden is going to raid Americans’ 401k and IRA retirement funds to fund the Federal government and its national debt.
Those funds currently hold about $18 trillion in assets.
Thus, even if Biden stole every penny in those funds, he could only pay off about 54% of the current national debt while causing tens of millions of senior citizens to fall into poverty.
If he only confiscated 10% then he would only be paying off 5.4% of the national debt.
The bottom line is that American individuals, whether they are billionaires or not, whether they have retirement lifelines in their 401k and IRA accounts, could not come close to paying off the national debt. And notice above that we keep talking about the “current'' national debt. As you have read these paragraphs, understand that the national debt has gone up thousands, if not millions, of dollars in the past 10 minutes or so.
The reason we are heading for financial disaster and ruin at the Federal government level is not because Americans are taxed too lightly, it is because Washington's political class spends too much and spends it too recklessly. As a result, quite quickly the dollar will collapse, hyperinflation will kick in, and our democracy will collapse in one financial heap.
2)And $33 trillion is not the whole story. Over the next 75 years, it is estimated that the Federal government will have about $80,000,000,000,000 in so-called “unfunded liabilities,” mostly because of Medicare and Social Security. This means an additional $80 trillion will need to be found/taxed/printed to fund those two programs since tax collections for them under the current rates are insufficient by $80 trillion.
Thus, while the current debt is $33 trillion, the Federal government also has to find another $80 trillion over the next 75 years to fund Social Security and Medicare at their current levels. Thus, in theory the Federal government should be collecting an additional one trillion dollars in taxes a year and saving that trillion to fund these future liabilities.
On an individual taxpayer level, this means that every individual taxpayer would have to pay an additional $6,200 a year in Federal income taxes EVERY year for 75 years to cover this unfunded shortfall. If this was to happen, which it will not since Washington politicians have no courage, that would mean that every individual taxpayer would have about $6,200 less each year to spend on a new car, new house, new clothes, vacations, etc. which would start to contract the economy which would reduce the overall income tax stream and the tax death spiral would be in place.
All of these numbers mean that we are in big trouble. We have debt today that will grow over time and unfunded liabilities that are not going away, all of which means that retirement benefits will have to be cut at some point in time, government services will have to be cut at some point in time, and if Washignton does not get its fiscal act together soon those cuts and the strong possibility of hyperinflation grow more realistic by the minute.
3)Okay, let’s get out of Washington’s fiscal problems and get down to states’ fiscal problems. We have often discussed the inevitable reality that a major city or an entire state will go bankrupt in the not too distant future. Cities in contention to go bankrupt first include:
New York City
Chicago
San Francisco
Los Angeles
Portland (dark horse candidate)
Seattle (dark horse candidate)
All of these cities have inept politicians who keep raising taxes, cutting services, and fostering ever rising crime rates. As a result, residents and businesses start leaving these cities for safer, less taxing, and better quality of life locations. This out migration causes the tax base to shrink, which reduces tax revenue, which leads to higher taxation (heaven forbid local politicians actually reduce government spending to match a shrinking tax base) on those who have not left and lowered government services which leads more residents and businesses to leave and the financial death spiral is underway.
The same financial death spiral can occur at the state government level, with the leading state candidates to go bankrupt pretty soon include:
New York
California
Illinois
New Jersey
This out migration movement is already underway. And maybe these states that could go bankrupt soon because of a dwindling tax base should look in the mirror and the following reality, the current highest bracket state income tax bracket:
California - 13.3%
Hawaii - 11%
New York - 10.9%
New Jersey - 10.75%
Thus, three of the states with the highest top state income tax bracket are on our list to soon go bankrupt. The only candidate not on this list is Illinois but they make up for the lower state income tax rate (4.95%) with much higher sales tax rates.
One more set of numbers. According to the US Census Department, in 2022 the following four states had the highest absolute net migration numbers:
California: -343,230 (this means that the state had 343,230 fewer residents at the end of the year vs. the beginning of the year)
New York: -299,557
Illinois: -141,656
New Jersey: -64 231
Thus, the top four states that we think have the best chance of going bankrupt also have the highest net loss of population and three of the four have some of the highest state income tax rates in the country. Are we seeing a pattern here? High taxes equal a loss of population over time which reduces the tax base which requires more taxation on those who do not move out which causes more to move out and the death spiral is already in place.
Note: someone might say that these states lost the most people because they have the largest populations, a valid point. However, if you look at the percentage loss of population the picture does not change that much: New York had the highest percentage loss of population (-.9%), Illinois had the second highest percentage loss of population (-.8%), and California had the fifth largest percentage loss of population (-.3%). Only New Jersey had its status change when looked at on a percentage loss perspective, losing only .1% of its population.
The bottom line is that American politicians spend and waste too much of our hard earned tax dollars. Their inefficient use of our taxes at the Federal level will lead to financial ruin if not fixed very quickly and their inefficient use of our taxes at the state and city level has now touched off financial death spirals in the cities and states listed above. The numbers don't lie even though politicians do.
Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:
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