The Atlanta Journal Constitution ran a rather pointed editorial cartoon the other day. It featured one of those "Support Our Troops" yellow ribbons you see on bumpers all over the United States.

But underneath it, the cartoonist wrote: "Offer void if injured mentally or physically, requiring quality care, therapy, recuperation and/or disability income."

In other words, all the good intentions and kind words are just ashes if the bills aren't being paid. And while Americans are a people of remarkably good intentions, they are not particularly diligent at paying bills.

Ask the grievously wounded soldiers at Walter Reed Medical Centre, the famous military hospital here in Washington. A months-long newspaper investigation recently exposed dreadful, mouldy living quarters and overloaded services. It also chronicled the desperate existences of veterans who sink into profound depressions waiting for disability allowances and proper treatment of their terrible physical and psychological wounds.

So much for the cherished American vision of a grateful nation welcoming its veterans home and sparing no expense to care for them.

The fact is, many of them were sent to war without proper armour in the first place, because top-grade armour costs money, as does first-rate post-battlefield health care. And paying these sorts of bills ultimately requires raising taxes, and that is something the American public is not prepared to tolerate, no matter what all the magnetic yellow-ribbon bumper stickers might say.

Get out the calculator

The war in Iraq costs $2 billion a week. But this hardly seems like a nation at war. The good times roll on, with no sacrifice evident anywhere, except of course in those families who have lost sons or daughters.

Mercedes sedans and Lexuses, often with a yellow ribbon on the bumper, are common in big American cities. All over the country, people are blithely remortgaging their homes to build new in-home theatres or to finance luxurious improvements (all tax deductible here).

On an individual level, Americans are racking up colossal amounts of personal debt. This is a country with a maxed-out credit card. Average monthly balance in each American household is between $9,000 and $12,000. The average load of unsecured consumer debt per U.S. household sits at about $35,000.

It is no wonder, then, that American voters send their elected representatives to Washington with a clear guiding principle: No new taxes.

In fact, President George W. Bush and the (until recently) Republican-controlled Congress went much further: They cut taxes, and pushed up spending at the same time. Not the best combination, from a fiscal standpoint.

So, unsurprisingly, the entire Iraq war is being fought essentially on borrowed money, which of course adds to the federal deficit, which of course feeds the national debt, which, as of this writing, stands at nearly $8.8 trillion US, a figure with so many zeroes as to be nearly incomprehensible.

Add in the grey heads

What's more, what's coming down the road in the way of anticipated expenditures could make that bit of red ink look like chump change.

Ben Bernanke, the Federal Reserve chairman and the man who controls the central bank strings, made a game effort to explain the numbers to legislators here this week.

The big demographic bulge known as the baby boomers is getting ready to retire, he noted. Meaning they will start to collect social security, and will likely require considerably more medical attention.

Those two items represent an unfunded liability that can also be measured in the trillions, and no one has done a thing to prepare for it.

Bernanke delivered a simple lesson about the public ledger sheet. Basically, that the money has to come from somewhere.

Either taxes have to go up, and considerably, or spending has to be slashed on an unheard-of scale. Keep borrowing, and the public debt balloons so fantastically it becomes an unmanageable fiscal crisis.

"This is sort of like a snowball rolling down the hill," said Bernanke, striving for a metaphor to impress a panel of skeptical politicians. "It's already a pretty big snowball, but it's going to get a lot bigger a lot faster."

In denial

Republicans, of course, argue that their tax cuts provide such an economic stimulus that the treasury will become much richer. Bernanke doesn't buy it. Tax cuts, he told the politicians this week, "usually do not pay for themselves."

"Whatever it is, you have to pay for it," he said. "That's what I'm saying."

And, of course, the longer politicians wait, the more severe and the more disruptive the eventual reckoning will be. "I think the right time to start is about 10 years ago," said Bernanke. Not a pleasant prospect for the legislators.

"We have difficulty explaining to the American public why the deficit is such a serious matter," House Budget Committee Chairman John Spratt told the Fed chairman.

But the explanation is actually simple. If something isn't done, it means a reduction in Americans' wealth and spending power, which is a very bad thing indeed, not just for Americans, but for the rest of the world, especially America's closest trading partner, Canada.

Something can be done of course. Canada did it. In 1995, the Wall Street Journal shocked Canadians by declaring their country an honorary member of the Third World. "Bankrupt Canada?" was the headline on the editorial.

Canada's debt at the time was 68.4 per cent of its gross domestic product. Thirty-five per cent of federal revenues were drained by interest payments on the debt. The deficit that year was $30 billion.

Today, of course, Canada runs surpluses, and has for almost a decade. Its debt is now less than 30 per cent of GDP.

The Canadian government cut spending dramatically and raised Canada Pension Plan payroll taxes years ago to deal with the anticipated burden of retiring boomers. The public wasn't happy, but accepted it.

The U.S., meanwhile, is creeping towards the kinds of debt levels that would qualify it for the Third World status that the Wall Street Journal once applied to Canada. Whistling past the graveyard was one characterization Bernanke agreed with this week.

You won't see the Wall Street Journal's editorial page say that nowadays, of course. But it's all a frightening prospect, or should be.

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LETTERS:

Many Canadians who have travelled to some of the big American cities and have met and talked to Americans would agree that the United States is maybe close to a third world country in terms of debt, but is certainly a "second world country" if such a term can be used,in most other regards.

The big American cities are filthy, in need of repairs, and most of the less fortunate citizens are neglected, left with no healtcare of proper social assistance, including their soldiers as it turns out.

Canada is a fist world country, the United States isn't. It is only a matter of time until China becomes the new world superpower especially with the uncontrolled arrogance and spending the current american administration is displaying.

—Claude Lavigne | Olds Alberta

I really enjoyed this article. I am a History major attending the University of Guelph taking mainly American History. You brought up a lot points that I have been really interested in understanding.

My concern is that with all this overspending and massive debt from the war, it seems like the United States and the world is headed towards a massive economic depression.

Because the US for the last one hundreds years has made a concerted effort for economic imperialism, they have stuck their greasy fingers into every nations economy. If and when their economy falls, the rest of the world's economies will fall with them.

My question for you is there any way to avoid what seems quite imminent?

—Dave Mullock | Toronto

This article by N. Macdonald really says it all--EXCEPT!What happens then!

The present Government seems to have taken off on the wrong foot AND in typical Conservative fashion as they did last time around with P.M. Mulroony-set out to prove that adulation of the U.S.A.to the the point of trying to emulate them is not necessarily a wise thing to do.

Whatever you may think personally of Cretien/ Martin of the 90's their leadership is largely responsible for the options in direction that Canada has available now.

—John McLenahan | Qualicum Beach,B.C.

As usual, your description of the situation in the USA was great.

When the Americans went to the invasion of Iraq; they thought they would enjoy the Iraqi oil income and the profit from the international contracts which they would award to the other countries! You remember exactly after the war haw Mr. Preimer was dividing the cake between the allies!

They thought it was a play in the theatre! They thought they could let the others pay for cost of the war. Only Britain and Canada who responded in real way. The USA planned to make money from the war as they did in the first Gulf War!!!!

It will be not far from now when the Wall Street journal would announce the USA as Third World country. Bankrupt USA. That started long time ago, from the beginning of the nineties. The saving in the USA is negative. The credit cards debt is over $ 14,5 billion. The money of the pension plan has been spent by the USA governments started by President Johnston when the congress allowed the government to borrow from that money after it was Trust Money!!!

This means the government has no money to pay for the retirees! They have to borrow money for that purpose. Actually, the USA government does not have the cash money or the sources to borrow money for its day to day expenditures! They play with the oil prices by increasing them; so the Gulf States invest the profits in the American Government Bonds which bring liquidity to the government of the USA!!

—Wa'el Darwish | Montreal

An excellent article. It also should concentrate minds who plan ahead in Ottawa that there is a huge problem looming for the Canadian economy if Canada does not diversify its trading economy. Because clearly as it stands now, the USA will implode one day and Canada with it however good our economic number are.

—D Laurin | Victoria