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Monday, May 24, 2010
US Magazine's most enjoyable section is their "Stars - They're just like us!" feature. Showing pictures of matinee idols taking out the trash and shopping at department stores, it's a reminder that the rich and famous are people, too.
Buying toilet paper at Target isn't the only thing we have in common with some stars. Many of them have also racked up serious, and potentially crippling, debt. In this way, they're just like the United States government: Its reckless spending has our nation teetering on the brink of financial disaster.
Consider Gordon Ramsay, the superstar chef with restaurants in cities across the globe and hit television shows on both sides of the Atlantic. The fine dining expert has expanded too quickly, racking up a debt of $377,887.77 in taxes to the state of New York alone.
Or think about Nicolas Cage, the Oscar-winning star of the National Treasure series. His debt problems - including $2 million in unpaid loans from East West Bank and $6.3 million in back taxes - forced him to put properties in three different states on the market.
Even minor celebs are having trouble living within their means. Lindsay Lohan has reportedly racked up more than a half-million dollars in credit card debt and was threatened with eviction for failing to pay rent.
Despite their common occurrence, stories like these never fail to surprise. It's difficult to fathom that the rich and powerful can face financial woes: Their omnipresence on televisions, magazine racks and the Internet lend them an aura of invincibility. In a way, the United States suffers from the same misperception. As the world's only hyperpower, and with the world's largest economy, it's easy to think that America can simply spend and spend without ever facing the consequences.
In reality, however, America is nearing a crisis point.
New numbers from the Commerce Department put our country's Gross Domestic Product (GDP) at about $14.6 trillion. With a national debt now above $13 trillion, America's debt-to-GDP ratio is a staggering 87 percent - perilously close to the 90 percent threshold at which economic growth stagnates, according to economists Ken Rogoff and Carmen Reinhart.
With our national debt accumulating at a rate faster than $1 million per minute, we could reach the 90 percent ratio before the dog days of summer draw to a close.
We might not be in as bad a shape as Greece, which is threatening to default on its national debt. But we're not far off from going down the same path: Without an immediate move toward fiscal sanity, the United States risks falling into an inescapable debt spiral.
This means doing more than putting a freeze on the budget. It means reducing the size of government. It means refusing to take on more debt to pass massive new entitlement programs. It means making hard choices about just where our priorities are.
Just as Chef Ramsay can't afford to open another three-star eatery, American citizens can't afford the radical expansion of government. If we're going to defeat the debt, we need to take action now instead of pretending as if the problem will solve itself. The answers are simple. They're just not easy.
Rick Berman is executive director of Defeat the Debt, a project of the Employment Policies Institute.
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