Clem SunterThe most probable ending to the temporary insanity afflicting Washington materialised a couple of days ago - kicking the can to January and February next year. But the size of the can is growing by the day and eventually nobody - not even the most powerful nation in the world - will be able to kick it further.I wrote an article recently about the magnitude of a $17 trillion debt. If you pay it off at $1 a second or $32 million a year, it will take you 531 000 years - a spectacular period of time. More relevant for the US government is that if the interest rate on all those treasury bills that make up the $17 trillion were to rise by 2% (which is not unreasonable when the tapering-off of the US Fed's purchases of bonds begins), it will add $340 billion a year to the annual budget deficit of a trillion dollars or an extra 34%. This will wipe out completely all the cost savings that have been achieved by sequestration and more. It will be a disaster, as it will make the budget deficit worse which will cause the rating agencies to downgrade US bonds even further, causing interest rates to rise even higher.Why is all this happening to the country that for more than a century has been perceived as a model of innovation, hard work and productive industry? There is one megatrend which explains it all: the ageing of the world's population but, more importantly, America's population. The baby boomers born after the Second World War are now becoming geriatric boomers and putting an ever-increasing load on the three great expenditure items in the US budget: Medicare, Medicaid and Social Security. Without a hike in the age of retirement and the age at which American citizens qualify for these benefits, the projected costs go through the roof. Taxes would have to be seriously increased in a country which believes in low taxes as strongly as in the right to bear arms.One statistic says it all: of all the people since the beginning of mankind who have ever lived beyond the age of 65, over half are alive today. It is often forgotten that the average lifespan of a citizen of Britain or America in 1900 was 40 years. In the last century, that figure doubled to more than 80 years through advancements in medicine. We are moving into a totally different world where our species for the most part are no longer young or middle-aged. We have not yet developed the systems to cope with this fact.So, all I can do is wish the inter-party Congressional committee examining ways of cutting federal expenditure, and who have to report back by the middle of December, lots of luck. This problem is not going to be resolved in the short term, if ever. Send your comments to Clem
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