Is America Bankrupt?


The yield on the U.S. ten-year treasury dipped below 1.40% this morning, the lowest in recorded history. Why does money continue to flow into this perceived “safe haven?” Is America really financially stronger than the rest of the world or are we bankrupt? To illustrate, allow me to introduce, “The Satirical World of Bob.”

When-Countries-Go-Bankrupt

Bob was an articulate, charismatic guy with a decent paying job. He did, however, possess a penchant for the good life and was motivated enough to do whatever it took to achieve it. When his first credit card application arrived in the mail – along with the normal circulars and other advertisements – he quickly grabbed a pen, filled it out and sent it in. Within two weeks, Bob had received his first plastic money machine. Machine I say, because in Bob’s mind, a credit card was like creating money out of thin air. Shortly thereafter, he had acquired 3 additional cards. After an extended shopping spree, Bob was the proud owner of a new state-of-the-art boat complete with all the requisite fishing gear, a few HD-TV’s, computers, various kitchen appliances, and whatever else he desired. Without much effort at all, his cards were soon maxed out. What did Bob do? Why, he got more credit cards, that’s what. In fact, in a few months, Bob had 24 credit cards, each at their limit, putting him exactly $1,200,000 in the red. With an annual income of only $75,000, his debt-to-income ratio was a staggering…..well let’s just say he was having trouble paying the minimum payment. What did Bob do? More credit cards? No! Bob figured he needed more income so he went job hunting (Where? Robbing other countries).

Uncle Sam begging for money

Bob had always been an avid news buff and enjoyed a good political debate from time to time. In fact, this congenial chap always fancied himself as the consummate soft-hearted, social minded sort. To him, the government seemed like a perfect fit for his spending proclivities. After all, he felt the massive federal debt was as necessary as mother’s milk is to a newborn babe. He also fancied the way the government could print new money without anything to back it up anytime it so desired. To him, deficits were just a normal part of life.

Before we return to our story, let’s exit our “Satirical World of Bob” and focus on a most pressing matter. FACT: The U.S. government is bankrupt! Yes, bankrupt. Skeptical? Ok, I’ll provide some facts and you decide.

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The government has an “official” debt of $15.8 trillion and mounting. But wait, there’s more. This doesn’t include the liability from Social Security and Medicare. When you factor these in, the amount according to some, exceeds $120 trillion. With U.S. Federal tax revenue of just over $2.3 trillion, that puts our debt-to-income ratio somewhere around 5,082%. Now let me ask you. If you, as an individual, entered your local bank and asked for a loan with a similar debt-to-income ratio, what do you think the loan officer would say? Would they give you the loan? Now let’s return to Bob.

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Bob ultimately found employment in Congress where he became one of the biggest spenders on the hill. He was re-elected several times by his constituents as they especially liked how Bob could “bring home the bacon.” In fact, Bob became rather wealthy in the process. From his vantage, there was no problem. Besides, as long as the boat remained afloat, everything was fine. However, when the children and grandchildren of his constituents became adults, their tax rate exceeded 75% and lost the desire to work hard since they could only keep about 25 cents of every dollar they earned.

Is America bankrupt? You decide.

Article written by: Mike Patton

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5 thoughts on “Is America Bankrupt?

  1. If we’re going to assess debt to GDP to decide how solvent a country is, then there are European countries in worst shape than the US is but the Euro doesn’t appear to be severely impacted and while Russia doesn’t have much debt, their currency is very close to being worthless while the dollar remains strong. This is why the dollar continues to be a safe haven.

    1. First of all I’m not an economist and honestly not that fond of politics. If they were my words I’d try to back them up but if you reread the article the language is simple enough to show something just isn’t right, don’t you think? I’m not going to get into a pissing match if that’s what you are looking for. I’d just ask you to be open to observe what’s really going on, which I personally think is nothing more than a bunch of manipulation.

      1. No pissing match really. The large debt may not seem right but America is still the world’s largest economy so there are clearly other factors that outweigh the large debt.

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