This month America likely will bump up against the Congressional mandated debt ceiling of $20.1 trillion. If the past is a harbinger of the future, lawmakers and the president will increase the nation's borrowing limit rather than deal with the smoldering financial caldron.
On March 1, the nation's debt teetered at $19.9 trillion. But America borrows $100 million every hour of every day to pay for federal budget expenses. At that rate, the debt will nick the $20.1 trillion cap on March 16. Unless Congress lifts the limit, America cannot borrow another penny.
How did the United States reach this financial precipice?
Blame it on Washington lawmakers' insatiable appetite for spending. Since 2000, the federal budget has more than doubled from $1.78 trillion to $4.15 trillion for fiscal 2017. America's debt has nearly quadrupled during the same time frame, soaring from $5.6 trillion to nearly $20 trillion.
The federal government is spending more than it confiscates in taxes from Americans. The result is a deficit. To make up for the gap, Washington must borrow ever increasing amounts of money to fund the federal budget. Both political parties have done little more than pay lip service to the problem.
Despite sharp increases in borrowing, the net interest paid by the feds has remained essentially flat over the last few years, thanks to the Federal Reserve's politically-driven policy of artificially holding down interest rates. Last year's tab for interest on borrowed money was $432 billion.
However, interest rates are ticking upward, which will make it more costly to borrow money to fund the government.
Despite repeated dire warnings, there never appears to be any sense of urgency in Washington to pay down the debt and rein in spending. Former President Obama was the most recent chief executive to sound the alarm about the albatross of debt draped around the neck of U.S. fiscal policy.
At the beginning of his first term, Mr. Obama pledged to tackle government spending. "I refuse to leave our children with a debt they cannot repay--and that means taking responsibility right now, in this administration, for getting our spending under control."
If only, Mr. Obama had heeded his own words. Instead, he racked up trillion dollar deficits in his first three budgets. After eight years in office, the former chief executive added a staggering $9 trillion in debt, the largest of any president in the nation's history. So much for fiscal integrity.
Some perspective: it took almost 200 years for the United States to accumulate $1 trillion in public debt. In a single year, the Obama Administration borrowed more than that amount. In just the last 16 years, lawmakers' unchecked spending has piled on nearly $15 trillion in debt.
The spending binge will not be curbed until Congress checks entitlement spending. Fifty-three percent of the federal budget is consumed by Social Security and health care entitlements, including Medicare, Medicaid and Obamacare. Elected officials refuse to deal with these hot potato issues.
By postponing the inevitable, Congress and the president are endangering the future financial solvency of the United States. If Washington waits too much longer to address the debt, Draconian taxes and ruthless benefit reductions will be required to restore financial order.
America cannot afford to avoid the issue because the day of reckoning is on the horizon. When it arrives, the younger generation will be punished because most of the burden will fall on their shoulders. Is that the future Americans want to bequeath to their grandchildren?
Showing posts with label U.S. Debt. Show all posts
Showing posts with label U.S. Debt. Show all posts
Monday, March 13, 2017
Sunday, July 10, 2011
Debt Ceiling Charade Masks Worse Problem
With each ticking second, the United States marches inexorably closer to reaching the end of its legal ability to borrow more money. The cash spigot will shut off when the federal debt hits $14.294 trillion, officially on August 2 according to the Treasury Department.
However, that deadline is just another part of the charade created by the media and the president. Here's what the politicians don't want you to know: the country actually bumped up against the legal debt ceiling on May 16. For the most part, the media has ignored that fact to shield the president.
In spite of the legislative mandated ceiling, the government (with the full knowledge of Congress) has continued to incur more debt because Treasury Secretary Tim Geithner has been clearing headroom by suspending investments in the retirement fund for federal employees. Those "investments" were being made with borrowed money.
In the ultimate shell game, Treasury technically can claim it has not exceeded the limit by sticking government IOU's in the federal retirement fund. It doesn't change the fact that the government has rung up more debt, but the money won't be "borrowed" until the ceiling gets raised.
As a result of this sham, the country's outstanding debt now rests at a staggering $14,343,033,186,678.55. That figure rises every hour, every minute, every second of every day. In the time it has taken you to read to this point, another $2.8 million has been added to the federal debt.
While Obama attempts to broker a deal to increase borrowing and save his failing presidency, the nation watches in mostly stunned disbelief as he continues to sell the idea that the collapse of the United States is imminent if the debt ceiling remains in place. If only the country can borrow a few more trillion dollars, the United States will be spared from financial ruin, the president contends.
To parody the president's favorite phrase, let's be clear about this: the United States has a debt problem. Borrowing even more money does nothing to address the issue. In fact, borrowing deepens the financial hole by raising interest payments on debt which worsens the federal deficit.
No politician dares mention the relentless raid on the nation's treasury to finance the current mountain of debt. In June alone, your government wrote a check for $110.5 billion just to pay the interest on the trillions of dollars it owes to investors. The country still owes every penny of the principal amount of $13,343,033,186,678.55. A sizable portion of that debt--$4.3 trillion--is held by foreign governments.
Last year the federal government paid $413.9 billion in interest alone to satisfy its financial obligations. In the first nine months of the current government fiscal year (October, 2010-June, 2011), the United States shelled out $385.8 billion just to meet the interest due to lenders. At this rate, the government will easily surpass the record of $451 billion paid in interest in fiscal year 2008.
Interest on debt is now the federal budget's fifth largest item. Debt costs rank only behind entitlements and defense and domestic security in the budget. No doubt interest payments will consume a larger share of the budget each fiscal year as the current historically low borrowing costs inevitably begin to escalate. The Federal Reserve can only suppress interest rates for so long. Even a quarter-percent increase in borrowing costs will have a grave impact on interest payments.
The debate over the debt ceiling has muted the alarms bells created by the ballooning interest on borrowed money. With government debt climbing at an annual rate of 8.5 percent since 2009, the nation has arrived at a critical tipping point, where interest payments are a threat to cratering the economy.
No Democrat or Republican has yet stepped up to the issue. Everyone in Washington, from the President on down, wants you to believe that borrowing more money ends the financial crisis and provides the country breathing room to address runaway budget deficits.
However, the interest payments on debt have helped create the very deficits that has everyone concerned. Unless the nation quits its borrowing habit, default on the national debt will be no less an issue than if the ceiling remains in place.
As the president often says, it is time for the Congress to act like adults. The only way out of this sticky financial mess is for the adults in the House and Senate to just say "HELL NO" to increasing the debt.
However, that deadline is just another part of the charade created by the media and the president. Here's what the politicians don't want you to know: the country actually bumped up against the legal debt ceiling on May 16. For the most part, the media has ignored that fact to shield the president.
In spite of the legislative mandated ceiling, the government (with the full knowledge of Congress) has continued to incur more debt because Treasury Secretary Tim Geithner has been clearing headroom by suspending investments in the retirement fund for federal employees. Those "investments" were being made with borrowed money.
In the ultimate shell game, Treasury technically can claim it has not exceeded the limit by sticking government IOU's in the federal retirement fund. It doesn't change the fact that the government has rung up more debt, but the money won't be "borrowed" until the ceiling gets raised.
As a result of this sham, the country's outstanding debt now rests at a staggering $14,343,033,186,678.55. That figure rises every hour, every minute, every second of every day. In the time it has taken you to read to this point, another $2.8 million has been added to the federal debt.
While Obama attempts to broker a deal to increase borrowing and save his failing presidency, the nation watches in mostly stunned disbelief as he continues to sell the idea that the collapse of the United States is imminent if the debt ceiling remains in place. If only the country can borrow a few more trillion dollars, the United States will be spared from financial ruin, the president contends.
To parody the president's favorite phrase, let's be clear about this: the United States has a debt problem. Borrowing even more money does nothing to address the issue. In fact, borrowing deepens the financial hole by raising interest payments on debt which worsens the federal deficit.
No politician dares mention the relentless raid on the nation's treasury to finance the current mountain of debt. In June alone, your government wrote a check for $110.5 billion just to pay the interest on the trillions of dollars it owes to investors. The country still owes every penny of the principal amount of $13,343,033,186,678.55. A sizable portion of that debt--$4.3 trillion--is held by foreign governments.
Last year the federal government paid $413.9 billion in interest alone to satisfy its financial obligations. In the first nine months of the current government fiscal year (October, 2010-June, 2011), the United States shelled out $385.8 billion just to meet the interest due to lenders. At this rate, the government will easily surpass the record of $451 billion paid in interest in fiscal year 2008.
Interest on debt is now the federal budget's fifth largest item. Debt costs rank only behind entitlements and defense and domestic security in the budget. No doubt interest payments will consume a larger share of the budget each fiscal year as the current historically low borrowing costs inevitably begin to escalate. The Federal Reserve can only suppress interest rates for so long. Even a quarter-percent increase in borrowing costs will have a grave impact on interest payments.
The debate over the debt ceiling has muted the alarms bells created by the ballooning interest on borrowed money. With government debt climbing at an annual rate of 8.5 percent since 2009, the nation has arrived at a critical tipping point, where interest payments are a threat to cratering the economy.
No Democrat or Republican has yet stepped up to the issue. Everyone in Washington, from the President on down, wants you to believe that borrowing more money ends the financial crisis and provides the country breathing room to address runaway budget deficits.
However, the interest payments on debt have helped create the very deficits that has everyone concerned. Unless the nation quits its borrowing habit, default on the national debt will be no less an issue than if the ceiling remains in place.
As the president often says, it is time for the Congress to act like adults. The only way out of this sticky financial mess is for the adults in the House and Senate to just say "HELL NO" to increasing the debt.
Thursday, April 21, 2011
Debt Bomb Poised To Destroy America
As the amount of debt barrels toward the government's legal ceiling, President Obama and the Democrats have launched a media-aided campaign of fear-mongering to spook Republicans into capitulating on raising the limit.
With the president leading the chorus, Treasury Secretary Timothy Geithner and other acolytes have stumped through the complicit media, warning of a financial collapse if the debt limit does not budge from the current $14.294 trillion level.
When President Obama was inaugurated, the nation's debt stood at $10.626 trillion. In January of this year, debt steamrolled past the $14 trillion mark for the first time in the nation's history. At the current level, the tab for the debt would be $128,687 for every taxpayer.
What few Americans know is that the "real" government indebtedness is much higher than $14 trillion. If you included the unfunded liabilities such as Medicare and Social Security, the true national debt is a whopping $119.5 trillion, according to the Cato Institute.
President Obama's failed economic rescue plan, which served up pork barrel projects for Democrats, fueled $3.9 trillion in debt in just two years. Without drastic measures, economists predict Obama's spending could add $5.9 trillion to the nation's debt in just his first term. In eight years, President Bush and the mostly Democratic Congress totaled $4.5 trillion in new debt.
Strings of zeroes after dollar signs soon just become mind-numbing statistics. But it is time more Americans began paying attention to to the numbers. For example, if you look closely you will find that the United States is fast becoming another Greece, the beleaguered poster-child for runaway deficits and bloated debt.
When Greece hit the skids in late 2009, its deficit was 12.7 percent of the nation's Gross Domestic Product (GDP). That country's total debt was 110 percent of GDP. Greece stumbled into a financial wall that necessitated a bailout by the European Union.
If you think it could never happen to the U.S., consider this: Last year the nation's deficit was 8.9 percent of the GDP. It is approaching ten percent this fiscal year and will surely reach that level in 2012, unless dramatic cuts are made.
For perspective, the federal deficit has breached 10 percent only four times in the country's history: the Civil War, World War I, World War II and 2008. Even in the Great Depression, the deficit's high water mark was 5 percent of GDP.
The U.S. debt was 97.3 percent of the nation's GDP as of the end of last month. The only constraint on the march to 100 percent is the current debt ceiling. Without Congressional action to move the limit higher, the federal government cannot legally borrow any more money.
That brings us back to the current Congressional crisis, which has been marked by scare tactics unrivaled in recent political memory. All the media and Democrat Party pundits are telling us that failing to increase the debt level will lead to another epic financial meltdown. If it sounds familiar, it's the same recycled argument that was used in the recent budget debate.
Congress should stop and ask a simple question: Do we want to lift the debt ceiling and watch as the United States of America becomes the next Greece? The numbers suggest we are not that far away.
The U.S. debt is already at its highest level in the country's history. Increasing the ceiling will only encourage more spending, more borrowing and more debt. Republicans keep promising to stem the debt tide, but each deal with Democrats produces no meaningful reduction in spending.
Many Americans may be immune to the debt issue, but others are clearly worried. The International Monetary Fund (IMF) warned the U.S. earlier this year to get its financial house in order. This month the ratings agency, Standard & Poor's, put the government on notice that it risks losing its AAA credit rating.
It is time for taxpayers to take a stand on this issue. Tell your Congressman or woman to vote "no" on raising the debt limit. If the debt continues unabated, the United States faces a fiscal time bomb that will destroy the economy and wipe out any hope of a return to prosperity.
With the president leading the chorus, Treasury Secretary Timothy Geithner and other acolytes have stumped through the complicit media, warning of a financial collapse if the debt limit does not budge from the current $14.294 trillion level.
When President Obama was inaugurated, the nation's debt stood at $10.626 trillion. In January of this year, debt steamrolled past the $14 trillion mark for the first time in the nation's history. At the current level, the tab for the debt would be $128,687 for every taxpayer.
What few Americans know is that the "real" government indebtedness is much higher than $14 trillion. If you included the unfunded liabilities such as Medicare and Social Security, the true national debt is a whopping $119.5 trillion, according to the Cato Institute.
President Obama's failed economic rescue plan, which served up pork barrel projects for Democrats, fueled $3.9 trillion in debt in just two years. Without drastic measures, economists predict Obama's spending could add $5.9 trillion to the nation's debt in just his first term. In eight years, President Bush and the mostly Democratic Congress totaled $4.5 trillion in new debt.
Strings of zeroes after dollar signs soon just become mind-numbing statistics. But it is time more Americans began paying attention to to the numbers. For example, if you look closely you will find that the United States is fast becoming another Greece, the beleaguered poster-child for runaway deficits and bloated debt.
When Greece hit the skids in late 2009, its deficit was 12.7 percent of the nation's Gross Domestic Product (GDP). That country's total debt was 110 percent of GDP. Greece stumbled into a financial wall that necessitated a bailout by the European Union.
If you think it could never happen to the U.S., consider this: Last year the nation's deficit was 8.9 percent of the GDP. It is approaching ten percent this fiscal year and will surely reach that level in 2012, unless dramatic cuts are made.
For perspective, the federal deficit has breached 10 percent only four times in the country's history: the Civil War, World War I, World War II and 2008. Even in the Great Depression, the deficit's high water mark was 5 percent of GDP.
The U.S. debt was 97.3 percent of the nation's GDP as of the end of last month. The only constraint on the march to 100 percent is the current debt ceiling. Without Congressional action to move the limit higher, the federal government cannot legally borrow any more money.
That brings us back to the current Congressional crisis, which has been marked by scare tactics unrivaled in recent political memory. All the media and Democrat Party pundits are telling us that failing to increase the debt level will lead to another epic financial meltdown. If it sounds familiar, it's the same recycled argument that was used in the recent budget debate.
Congress should stop and ask a simple question: Do we want to lift the debt ceiling and watch as the United States of America becomes the next Greece? The numbers suggest we are not that far away.
The U.S. debt is already at its highest level in the country's history. Increasing the ceiling will only encourage more spending, more borrowing and more debt. Republicans keep promising to stem the debt tide, but each deal with Democrats produces no meaningful reduction in spending.
Many Americans may be immune to the debt issue, but others are clearly worried. The International Monetary Fund (IMF) warned the U.S. earlier this year to get its financial house in order. This month the ratings agency, Standard & Poor's, put the government on notice that it risks losing its AAA credit rating.
It is time for taxpayers to take a stand on this issue. Tell your Congressman or woman to vote "no" on raising the debt limit. If the debt continues unabated, the United States faces a fiscal time bomb that will destroy the economy and wipe out any hope of a return to prosperity.
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