What if the government fails?

With all the debate over healthcare, one question that I have not found anyone asking or answering is “What happens if the government fails?” I’m not talking about failing to deliver on its promises on health care, I’m talking about what happens if the government fails like Bear Stearns or GM. What happens if the government can no longer function due to bankruptcy or some other kind of incapacity that leaves it incapable of delivering the services it promises in the form of health and social security?

Many people will dismiss this kind of question as meaningless conjecture, but I think such people fail to deal with the facts of the situation the federal government faces:

• By 2020, the federal government could owe as much as $20 trillion in debt, which debt does not include debts held by state and local governments nor that held by individuals, even while the projected gross domestic product will have only grown to around $16 trillion by that time.
• By 2020, health care, Medicaid, Medicare, and Social Security could account for as much as ¾ of a more than $5 trillion per year federal budget, while interest payments on the national debt will total more than $1 trillion per year and will continue to increase.
• Medicaid is in significant financial trouble even now. The Medicare trust fund may go bankrupt as soon as 2012. Social Security may go bankrupt as early as 2020. If the health care law cost goes the way of most federal programs, the supposed $200 billion in savings will become $500 billion in debt in the next decade.

For a primer on what happens to governments that find themselves in the position described above, one we only have to look at the current economic situation in Greece or what has happened to fragile governments in Africa or Central and South America. Even governments cannot continue to spend forever, and when they spend too much, they fail under the weight of the debt.

The difference between those other nations and the United States is the sheer magnitude of the debt we are talking about. There is no nation–even China—or group of nations—even the UN or the International Monetary Fund—that has the kind of capital reserves necessary to bail out the US government if it defaults on its debt.

This problem illustrates the extreme danger created by the liberal drive to concentrate so much power and capacity in the hands of the federal government. By doing so, these people reduce the diversity and stability of the federal republic, weakening state and local governments to the point of impotence as the money and influence becomes concentrated in the hands of fewer and fewer agencies and people.

If that concentrated power fails, it creates a vacuum, but because the more local infrastructure has been weakened or destroyed, there is nothing left to fill that vacuum, and the system collapses. History is replete with examples of nations failing for essentially the same reasons. For anyone to believe it cannot happen to the United States under similar circumstances is to reveal the height of arrogance.

What is the solution? Well, it is complex to be sure, but it involves creating reforms that return power and money to the state and local level, reduce the size of the federal government, and reduce the federal debt. If we dedicate ourselves to returning the balance to the federal republic that its designers envisioned, we can avoid the disaster we seem to be otherwise creating.

DLH