It is a good thing for Team Obama that “lemon laws” do not apply to campaign assertions made in 2012 — radical Islamists are rising across oil-bearing Middle Eastern hot spots, while General Motors and the American economy stumble in reverse.
And, what he did in the aftermath of horror in Benghazi, President Obama does again — he campaigns and relaxes in taxpayer-funded luxury while the rest of us watch the sun set on the American Dream.
America has a festering and unresolved debt problem — it is irrefutable and it cripples options for making true progress.
In 1973, as energy prices quadrupled in the first “oil shock,” American households, businesses, financial institutions and governments had total combined debts of $2,104 billion, or 1.47 times our gross domestic product that year of $1,429 billion. By 1979, during the next oil shock, our total debt reached $4,105 billion or 1.56 times our $2,632 billion GDP.
Scroll forward to 2001, when conflict with radical Islam reached across the Atlantic Ocean — our national debt stood at $28,529 billion, or 2.68 times our $10,625 billion GDP. And by 2013, more than 12 years into a war that goes poorly, America’s total debt reached $55,992 billion, or 3.33 times the national output of $16,800 billion.
The pain for America of a growing debt burden was cushioned by steadily declining interest rates. But what happens when interest rates on American debt are pushed toward higher levels seen from 1973 through 2008? What happens when households, businesses, financial institutions and governments no longer can add to or even roll over their debts?
To bring total American debt down to 2001 levels as a share of GDP we have to repay $10,968 billion. To get down to 1979 levels, we have to repay $29,784 billion. And to reach 1973 levels, we have to repay $31,325 billion, only a little less than twice the value of all the goods and services Americans produce in a year.
America cannot be effective as the world’s policemen while besieged by debt collectors.
The second intractable problem that President Obama ignores is the makeup of America’s population — the proportion of senior persons (aged 55 and up) compared to active persons (aged 25 to 54) is at levels that sap economic output.
During three previous tests for America in the Middle East, our population mix helped support ongoing economic activity.
In 1973, there were 54.20 senior persons for each 100 active persons. By 1979, there were 55.95 senior persons for each 100 active persons. In 2001, the number of senior persons for each 100 active persons dropped to 48.67.
But the ratio has since soared rapidly. By 2010, there were 60.37 senior person for each 100 active persons — and the picture gets much worse in future.
The best long-term estimates suggest that the ratio of senior persons to 100 active persons will keep raising through 2050, to levels never seen in history: in 2020, 74.62; in 2030, 80.68; in 2040, 82.87; and in 2050, 84.75.
Senior persons earn less, consume less, and borrow less — so economic pump-priming by deficit spending and lowering benchmark interest rates cannot be effective.
How will an indebted, aging, and relatively small American population defend western civilization against emboldened radical Islamist elements and others who may rally against us?
Americans are playing out a truth Nobel Laureate Ernest Hemingway described in “The Sun Also Rises”: “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.”
American voters and economic realities soon will remind the Obama administration that the Constitution remains the law of this land.
• Charles Ortel serves as managing director of Newport Value Partners (NewportValue.com), which provides economic research to executives and to investment firms.
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