4/28/16 House of Cards

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Last week’s commentary on unfunded liabilities generated more email than any other topic in the past few years. Viewers expressed alarm at how Washington has created a financial house of cards that – without change — will one day collapse.  Washington will run out of money.

Here’s what’s happening behind the headlines.

Discretionary spending refers to appropriations that pay for government programs such as the Departments of Defense and Education.  Congress votes on these each year.

Non-discretionary spending are entitlement programs such as Medicare, Medicaid and Social Security.  Washington long-ago promised how much it’ll pay out to people.  Non-discretionary spending also includes interest payments on the 19 trillion dollar national debt.

This spending eats-up two of every three dollars spent in Washington. This is what will break the bank.

As currently structured, entitlements promise to pay out more money than we’re taking in.  One-day there’ll be no money left for these programs. This is called unfunded liabilities.

Many viewers suggested cutting Congressional pay and ending welfare to make-up the difference.  This is well-meaning.  But it’s only a drop in the bucket. 

If government taxed everyone at 100% — by confiscating every cent they earned – it still wouldn’t be enough.

The only way out of this mess is to completely overhaul these entitlement programs.

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