in the middle of the night

The American standard of living is in jeopardy as never before.

Our collective historical economic success has been built on the hard work and personal responsibility of the free enterprise system. Personal saving and investing were hallmarks of that success.

Now, however, we are a nation of debtors as well as a debtor nation. And the proceeds of that debt have been spent on consumption (by individuals) and transfer payments (more consumption) by government.

There is a limit to how much we can borrow. The Wall street investment banks have reached that limit and are contracting rapidly. Consumer borrowing and spending have also contracted sharply in recent months.

Only the Federal Government seems to have unlimited borrowing capacity as every economic sector queues up for its own rescue. But the government’s borrowing capacity is also finite, and we may in fact be approaching that limit faster than we think.

The Federal Government has committed approximately $1 trillion of borrowed money to various bailout and rescue schemes, and the federal budget deficit for fiscal 2009 may exceed $1 trillion in a total economy of less than $15 trillion.

And that’s before President-elect Obama’s administration tees up regulatory reform, energy reform and healthcare reform. Any time a Democratic administration legislates “reforms,” higher spending and taxes are usually involved.

How will we pay for all of it? More taxes on the rich will not cover the bill. Sounds like more borrowing.

And yet our principal lenders have increasing concerns at home. China’s $500 billion domestic stimulus package will reduce the amount of their foreign currency reserves available to buy our debt, and the rapid decline in oil prices below $50 will surely reduce Treasury purchases by the oil states.

Sooner or later, we must learn to live on what we earn. That time may be sooner than we think.