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Message MainStreetEconomics.orgLESLIE A. RUBINNovember 2024YOU HAVE HEARD IT ALL BEFORE: WHY TODAY IS DIFFERENT!
1Our Ship of StateMainStreetEconomics.orgLESLIE A. RUBINSection I: Why today is different!The United States is Bankrupt. Kaput. We are not OK. I know what you are thinking, ‘I have heard this all before, so what’s differenttoday?’ Appropriate question: Everything! First, I am going to explain what is different today, and then go over the facts youneed to know and why this matters to you. And most importantly, what can we doabout it.So please, invest a few minutes to understand this, because without your supportthe folks in Washington will not fix the problem. It is up to us, we the people, tounderstand this and send a message to our elected representatives – fix this messwhile there is still time. A key measure of financial risk is the ratio of debt to our economy, Gross DomesticProduct (GDP) - over 60% is a warning zone, over 90% is the danger zone, accordingto a study by Reinhart and Rogoff of over 65 countries, over 8 centuries spanning 5continents. (FYI, the Maastricht Treaty, which created the European Union in 1992,specified 60% as the maximum ratio, although none are following this criteria.) During World War II our debt to GDP ratio exceeded 100%, the danger zone, justlike now. But after that, we had 2 decades of fiscal responsibility and a rapidlygrowing economy, and that ratio dropped to under 40%, a very comfortable ratio.Today, our debt to GDP ratio is 125%, well above the danger zone. But now, theprojections are for it to get worse, and worse and worse, unlike the period afterWorld War II – and these are estimates from the non-partisan Congressional BudgetOffice (CBO)! It is projected to rise to over 200% over the next few decades. Ourship of state, the USS Titanic, is headed directly at the iceberg, No advanced civilization has ever survived debts like these. If you are a concerned citizen and care about the very survival of this country, youneed to understand this and then do something about it. The issue is not hard to understand, but it is very hard to fix.
2Our Ship of StateMainStreetEconomics.orgLESLIE A. RUBINOur Founders understood the importance of freedom and liberty and broke awayfrom the King of England because of the tyranny with which he ruled. Our foundingdocuments were brilliant, stating clearly the rights of man and our desire forfreedom. They understood that too large a central government would lead to tyranny andloss of freedom. So, they designed a Constitution with limited federal power, withchecks and balances on that power, and clearly stated in Amendment 10 that allpowers not vested in the federal government belonged to the ‘states or the people’.Our current government has completely lost sight of the Founders’ wisdom. Wehave grown a massive federal government with a bureaucracy which seeks tocontrol more and more of our very lives. This has led us to the course we are on,headed toward the iceberg.Here are a couple of prophetic quotes that you should read:The first is by John Adams, one of our Founders and our second president.“Democracy never lasts long. It soon wastes, exhausts, and murders itself.There was never a democracy yet that did not commit suicide.”Let that sink in.The second is from a little-known Scotsman, Alexander Tytler from 250 years ago.He was a historian and judge:“A democracy cannot exist as a permanent form of government. It can onlyexist until the voters discover that they can vote themselves largesse from thepublic treasury. From that moment on, the majority always votes for thecandidates promising the most benefits from the public treasury with the resultthat a democracy always collapses over loose fiscal policy, always followed bya dictatorship.” Folks, that is exactly what is happening today. As I noted earlier, no advancedcivilization has ever survived with a fiscal policy as loose as ours. Section II: A Bit of History
3Our Ship of StateMainStreetEconomics.orgLESLIE A. RUBINJust the Facts, Ma’am. That was the famous line from Sargeant Joe Friday of the oldTV show, Dragnet, for those old enough to remember.Here are the facts of today:· $36 trillion - our current interest-bearing debt as of November 2024, or $277,350for every family in this country· $1 trillion - the current annual interest on the debt, more than we spend onnational defense· $128 trillion - the total U S government obligations as of September 30, 2023, thelast available financials from our government, including unfunded obligations ofSocial Security and Medicare, or $986,892 for every family in this country· $56 trillion - the CBO estimate of our interest-bearing debt in 10 years, resultingfrom multi-trillion-dollar deficits as far as the eye can see or $431,765 for everyfamily in this country· $150 trillion - the CBO estimate of interest-bearing debt in 30 years, or $1,156,515for every family in this country.· $37.5 trillion - the negative net worth of the federal government as of September30, 2023· 10 years – the time frame when the Trust funds for Social Security and Medicareare exhausted. Under current law, at that time, benefits must be severely cut. This data is real. It comes from our government and is based on current policy,which does not include any new federal programs, recessions, wars, or otherunforeseen cost. It also assumes the 2017 tax cuts all expire as provided undercurrent law, which is unlikely to happen. The future will likely be worse, but no oneknows how much worse, if we continue down our current path.Section III: Just the facts, Ma’am
4Our Ship of StateMainStreetEconomics.orgLESLIE A. RUBINOur own government in the annual financial statements states clearly. ‘the current fiscal path is unsustainable.’These numbers are hard to envision, so let’s make them relatable to your family.Let’s take 8 zeros off the federal income statement for 2023 and see what yourfamily budget would look like: Revenue $44,656 Expenses $76,617 Loss $31,961 Credit card debt $277,350You are bankrupt. You can no longer borrow money and pay your expenses.The United States is bankrupt, but it can still borrow money so it can keep onkeeping on. For now. Section III: Just the facts, Ma’am
5Our Ship of StateMainStreetEconomics.orgLESLIE A. RUBINIn my journey into economics, I have published 2 books and 2 pamphlets. One book is ‘Why You Should Give a Damn about Economics’ and is a primer onbasic economics, Econ 101 for laymen, condensed into 95 pages with a finalsection on the problems we face. The second book is co-authored with economist Dan Mitchell, ‘The Greatest PonziScheme on Earth’. It has three sections with the first section that delves into theeconomic problems we face with a chapter on what happens when the Ponzischeme fails. The second section explains how and why countries through historyhave succeeded or failed economically, and what policies they followed to get tothose outcomes. We draw conclusions from this analysis, which logically flows tothe final section: how do we fix the problems we currently have?I am not trying to sell books; hell, nobody reads anymore.I am trying urgently to Alert and Alarm you, yes, scare the bejesus out of you.You need to understand the Ponzi scheme our government is running rightnow, what our future holds if we continue our present course – AND mostimportantly, what we can do about it. I’m sure you get it by now - our federal debt is that Ponzi scheme. There will neverbe a surplus in the federal budget if we continue with current policy - only multitrillion-dollar deficits forever, according to the CBO. So, the only way we can repaythe maturing debt and fund continuing deficits is to borrow more money.That, folks, is a classic Ponzi Scheme. It works until it does not, until our creditorsfinally lose confidence in us, and we can no longer borrow more money.*Here is an interesting fact. The US government must borrow $10 trillion($10,000,000,000,000) new dollars this year. About 8 trillion is to pay off maturingdebts, and about 2 trillion dollars is to cover our deficit for the year. That isastounding, and each year it will get worse. In 10 years, that number will be almost 20trillion per year in new borrowing.Section IV: The Great Ponzi Scheme
6Our Ship of StateMainStreetEconomics.orgLESLIE A. RUBINWhen will the Ponzi scheme collapse? I don’t know, nobody knows, but wheninvestors lose confidence in our ability to repay the debt and stop buying our debt,it will collapse, then we will be toast. My guess, maybe 10 years – if we are lucky. When the Ponzi scheme finally collapses, it will make the Great Depression look likechild’s play. And if the US gets sick, the whole world will catch the disease – the U.S. is that important to the world economy. It will mean the worldwide collapse of oureconomic system. Nothing will be safe.You may think nothing can harm us; we are good. Yes, complacency has set in. Forthose that don’t understand economics, they think we can just print the money, andall will be fine. Wrong! Are you familiar with Venezuela or Zimbabwe? They did just that – printedmoney out the wazoo. The result is always hyperinflation and their economicsystem collapsed. In Zimbabwe they were printing 100 trillion-dollar bills - that wereworthless. Greece was warned in the early 2000’s about their imminent problems, Cassandra(the mythical Greek goddess who could see the future, but no one would believeher) saw this coming and was shouting loudly - no one believed her. Whathappened? They failed. But, But, But, they were small enough that the EU(European Union) could come to their rescue and bail them out, so they survived.However, their economy today is weaker than it was 20 years ago.But you might say, the U.S. is different. After all, we have the world reserve currency.But that is true because – for now – the U.S. retains the confidence of the globalfinancial system, which really doesn’t currently have any alternative to the Dollar asthe world’s reserve currency. But that confidence was earned and is now beingsquandered. It is nowhere etched in stone that the Dollar will always be the world’sreserve currency, and when the world’s confidence evaporates – which it will if wecontinue our current course – we will eventually go the way of Venezuela andZimbabwe.So, if the US collapses, who is going to bail us out? Nobody. We are not too big tofail - we are too big to save. Section IV: The Great Ponzi Scheme
7Our Ship of StateMainStreetEconomics.orgLESLIE A. RUBINI know you folks want to hear how great things are, the future is bright, all is well. Iwish that were my message - it is not.Washington DC – our elected representatives - have made a mess of our federalfinances, and it will be very hard to repair the damage. The good news is that it is not too late, we know how to fix the problem, but it is noteasy. Do we have the will to fix it? Now you understand the problem – you have just seen the data - and the seriousconsequences which lie ahead if we let the USS Titanic sail into the iceberg. Wemust not let that happen. Folks, our generation inherited a country that worked. For almost 200 years weprospered and grew into the mightiest country in the world with limitedgovernment and modest taxes. Today we are about to hand over to our kids,grandkids, and all future generations a country that is broke, kaput, and headed tofailure.We should be ashamed of ourselves if we let that happen. It is immoral andunconscionable for us to do that to our heirs. Section V: What Should We Do?
8Our Ship of StateMainStreetEconomics.orgLESLIE A. RUBINSo, how do we fix it? It will be hard, nothing will be easy given where we are today,but we must start now. I see 4 major areas to focus on:Term Limits. We are not governed by Statesmen, like our Founding Fathers were.We are governed by a permanent class of professional politicians who are there foras long as they can provide ‘goodies’ to voters and continue to be elected. Limitingtheir terms, like we have done for the President, will be a major step to end thattrend. They will then be motivated to do what is best for country, without regard tokeeping a permanent political position. This will help move us back to soundthinking based on what is good of our country, as was the case with our Founders.Devolve Government. By that I mean move our massive government back towardthe role devised in the Constitution, with powers not specifically assigned to theFederal government reserved to the states, or the people. We can eliminate wholefunctions at the federal level, and simplify others, reducing dramatically the size andcost of the bloated bureaucracy, which seek to control our lives. Reform Entitlements. There are many entitlements that need to be fixed, but I willonly mention the ‘big 3’ – Social Security, Medicare, and Medicaid. These programswere well intended and should stay, but they are financially dysfunctional and are amajor cost to the government, as they are now structured. This will get much worseover time with an aging population. They are major drivers of our deficits and mustbe reformed and done so without harming the truly needy beneficiaries that needthe help. Fair Taxation. Our tax code is a disgrace, 75,000 pages of unintelligible codes andrulings. It is so full of loopholes, special interests, and crony provisions, it isunfixable and unfair. President Carter once said it is a disgrace and we should put amatch to it. He was right then, almost 50 years ago, and it has only gotten worse.We need our government to implement a tax code which avoids double taxationand has rates low enough to incentivize people to work hard, create and innovate –and avoids giveaways to entrenched, politically powerful special interests that wecan ill afford and distort our economy. Section V: What Should We Do?
9Our Ship of StateMainStreetEconomics.orgLESLIE A. RUBINIn Summary. We need better governing, lower cost of the federal government, anda fair and modest tax system. If we can do that, we will have faster growth and abright future. How do we know that? We know because we have a huge laboratoryfrom which to learn - called the real world. We have learned there what works andwhat does not. We know the prescription for a bright future. But do we have thepolitical will to take the medicine? Fixing the problem is very hard and painful. Not fixing it will spell eventualdisaster. My fellow Americans, hear my plea. Listen, learn, and act - speak up, speak out, to our elected representatives; wethe people must demand change, for it is only with the insistence by theAmerican people and our support for change, will our elected officials inWashington do the right thing.Thank you for taking the time to read this, and please, do the right thing while thereis still time. Conclusion
ABOUT THE AUTHORLeslie A. Rubin is a professional accountant, entrepreneur,philanthropist, and real estate developer. He has studied economicsfor over forty years and been heavily involved with economiceducation locally, working with schools, writing articles, andcommissioning sculptures on economic themes for his real estatedevelopments, which allowed him to gain a clear understanding ofwhat makes economic systems work and the power of incentives. Rubin’s passion for economics and economic education inspiredhim to create Main Street Economics Inc., a nonpartisan, nonprofitorganization that provides the average person on “Main Street” theopportunity to learn about economic systems without going back toschool.Les graduated from University of North Carolina at Chapel Hill inaccounting and was elected to Phi Beta Kappa and Beta GammaSigma honorary societies. For ten years he was a practicingCPA/controller and has been the owner and president of his owncommercial real estate development company, Rubin DevelopmentCorporation, for almost fifty years.10AUTHOR BIOMainStreetEconomics.org LESLIE A. RUBIN
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