President Obama has mentioned, if I am not mistaken, that he inherited a mess.

President Obama, you ain’t seen nothin’ yet.

George Shultz, a former secretary of the Treasury, and several other financial experts, have authored a sobering piece in the Wall Street Journal that foretells what the next Treasury secretary will inherit. Here is the gist of it:

The next Treasury secretary will confront problems so daunting that even Alexander Hamilton would have trouble preserving the full faith and credit of the United States.

They point out that annual spending by the federal government now exceeds our 2007 level by $1 trillion. This is in a slow economy with revenues the same as in 2010. The increase in borrowing to support the spending amounts to a debt of $55,000 per year for every U.S. household.

The spending is one thing; interest payments on the debt to sustain this spending is another burden. You can almost hear President Obama calling on higher taxes for millionaires and billionaires, can you? It should be noted here that the top 1 percent already pay 37 percent of all income taxes, while half the population pays none.

The Fed has been running the show:

The Fed has effectively replaced the entire interbank money market and large segments of other markets with itself. It determines the interest rate by declaring what it will pay on reserve balances at the Fed without regard for the supply and demand of money. By replacing large decentralized markets with centralized control by a few government officials, the Fed is distorting incentives and interfering with price discovery with unintended economic consequences.

Did you know that the Federal Reserve is now giving money to banks, effectively circumventing the appropriations process? To pay for quantitative easing—the purchase of government debt, mortgage-backed securities, etc.—the Fed credits banks with electronic deposits that are reserve balances at the Federal Reserve. These reserve balances have exploded to $1.5 trillion from $8 billion in September 2008.

The Fed now pays 0.25% interest on reserves it holds. So the Fed is paying the banks almost $4 billion a year. If interest rates rise to 2%, and the Federal Reserve raises the rate it pays on reserves correspondingly, the payment rises to $30 billion a year. Would Congress appropriate that kind of money to give—not lend—to banks?

The Fed's policy of keeping interest rates so low for so long means that the real rate (after accounting for inflation) is negative, thereby cutting significantly the real income of those who have saved for retirement over their lifetime.

Unless you have discovered the fountain of youth and will be able to work indefinitely, this should give you pause.

Shultz & Co. also note that the Consumer Financial Protection Bureau, which has the ability to further slow economic growth, is also being paid for by the Federal Reserve “rather than by appropriations, severing the checks and balances needed for good government.”

Alexander Hamilton recognized that the greatest asset of a nation is its ability to pay its debts. A nation must have the ability to issue debt, and the U.S. has used that ability to, for example, recover after the Civil War. But today, the article points out, we are issuing debt for programs, many not vital to us as a nation, to cater to various interest groups.

I don’t know if this is the good news or the bad news:

The fixes are blindingly obvious. Economic theory, empirical studies and historical experience teach that the solutions are the lowest possible tax rates on the broadest base, sufficient to fund the necessary functions of government on balance over the business cycle; sound monetary policy; trade liberalization; spending control and entitlement reform; and regulatory, litigation and education reform. The need is clear. Why wait for disaster? The future is now.

In light of our dire situation, it is infuriating that the media, an institution that has such high regard for itself, insists on covering the current presidential campaign as a gaffe-athon. Next time a poll asks a moronic question about which candidate you’d rather have as a nurse if you’re sick, remember the Schultz column.