The Dismal Reality: We're Screwed (and a CPA Confirms It)
Continuing our theme of rubbing other bloggers we love today, we decided to give our friend The Exuberant Accountant a fat shout-out for his wonderful piece today entitled Is our Country on a Collision Course?
As an accountant and auditor I have been trained to make assessments on the health of organizations. In fact, we even have a special model we use called the Altman Z-Score. This mathematical formula determines the probability that an organization will go into bankruptcy. As I read Lawrence Kadish’s article titled, Taking the National Debt Seriously in the Wall Street Journal, I just kept thinking of the Altman Z-Score.
Our national debt is approximately $12 trillion dollars and currently 40% of all individual taxes collected are used just to pay the interest cost on this loan.
The Office of Management and Budget (OMB) projects deficits of about $9 trillion over the next 10 years (this does not include any national health care legislation that is being proposed).
You do not need to be a CPA to figure out we are on a collision course with pain. If our cost of borrowed money were to increase to 15% and our deficit were to grow as projected to $20 trillion…a massive amount of our tax receipts would be required, just to pay the interest on the national debt.
As a business owner, if I expected interest rates to increase I would want my CFO to lock in long term rates as much as possible. The main reason our current politicians do not do what is prudent for the long term is they are mostly concerned with getting reelected. This is not a democrat or republican issue. Both sides have been guilty of fiscal irresponsibility.
I fear the only way to change our course and avoid the inevitable pain, is to elect politicians who have some fiscal responsibility. Otherwise the Altman-Z score will calculate: Bankruptcy is Imminent.
Click on over to see the rest. And do be nice to Scott while you're over here, how he got associated with a potty mouthed tattooed hipster like myself I'll never know but I'm glad he did. Love ya, Scott, and incredibly well-said as usual!