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National Debt Now Equals Entire US Economy

From USA Today:

U.S. debt is now equal to economy

By Richard Wolf
January 9, 2012

WASHINGTON – The soaring national debt has reached a symbolic tipping point: It’s now as big as the entire U.S. economy.

The amount of money the federal government owes to its creditors, combined with IOUs to government retirement and other programs, now tops $15.23 trillion.

That’s roughly equal to the value of all goods and services the U.S. economy produces in one year: $15.17 trillion as of September, the latest estimate. Private projections show the economy likely grew to about $15.3 trillion by December — a level the debt is likely to surpass this month.

"The 100% mark means that your entire debt is as big as everything you’re producing in your country," says Steve Bell of the Bipartisan Policy Center, which has proposed cutting nearly $6 trillion in red ink over 10 years. "Clearly, that can’t continue."

Long-term projections suggest the debt will continue to grow faster than the economy, which would have to expand by at least 6% a year to keep pace.

In other words, our debt is growing at a 6% rate, while the GDP is growing at about 2% – at best.

President Obama’s 2012 budget shows the debt soaring past $26 trillion a decade from now. Last summer’s deficit reduction deal could reduce that to $24 trillion

Wow, what a difference that $2 trillion will make. (Not that it will ever happen.)

Among advanced economies, only Greece, Iceland, Ireland, Italy, Japan and Portugal have debts larger than their economies. Greece, Ireland, Portugal and Italy are at the root of the European debt crisis

And isn’t it funny how little press these countries get these days from our media watchdogs?

Economist Mark Zandi of Moody’s Analytics says reaching the 100% mark shows "the grave need to address our long-term fiscal problems."

The hell you say.

By the way, in the next two weeks Mr. Obama is going to ask Congress to raise the debt ceiling by another $1.2 trillion dollars. That, the administration hopes, will see the government through until after the November elections.

This article was posted by Steve on Monday, January 9th, 2012. Comments are currently closed.

2 Responses to “National Debt Now Equals Entire US Economy”

  1. Petronius says:

    It’s beginning to look like we are running out of other people’s money.

    In addition to the debt of $15.2 trillion, the government has $117 trillion in unfunded liabilities. This amount of debt cannot be sustained by a $15 trillion economy––not when debt is increasing at a faster rate than the economy, thanks in part to the miracle of compounding interest, and in part to a system where so much of our income depends on transfer payments created by political largesse.

    The fact is that there are no tax rates consistent with the functioning of a market economy that will raise sufficient revenue to finance this level of debt.

    And so the government creates new debt to finance old debt.

    The Federal government is presently able to function only by financing these layers of debt through negative real interest rates. But this period of negative interest rates will not last forever. Negative interest rates are not conducive to savings and investment––conditions necessary for economic growth and job creation.

    And the demonization of the rich is unhelpful to economic growth, as is the threat of higher taxes on the rich and on businesses, and as is the regulatory clamp-down on all forms of economic activity.

    Most countries in our position eventually either default or inflate. Both scenarios have dire consequences––economically, politically, and socially.

    A quick and early default is perhaps preferable to inflation. However, inflation is more likely because it is politically expedient. Money printing has become a political instrument.

    At some point market acceptance of US paper dollars as a medium of exchange and store of value will reach a tipping point. This is not a question of economic data; rather it becomes a matter of fragile public confidence and psychology.

    At bottom there is more at stake here than the approaching squabble over the debt ceiling.

    We need to have a national public debate about government spending versus fiscal responsibility. About the proper role of government. About the merits of Liberal-Marxist class warfare, confiscation, redistributionism, socialism, and big-government statism, on the one hand, versus, on the other hand, the merits of freedom in a market economy. We need to decide once and for all which kind of country we want to be. And what kind of people we want to be––free or slave.

    And let us pray that for once the media and universities will give fair hearing to our side.

    If at the next election we are unable to come to a firm agreement about these two alternative paths, Marxism versus Capitalism, it is probably time that we split up the country, part company, and go our separate ways. But we owe it to ourselves and to our posterity to make one final effort to preserve the Union. So let us have that debate.

  2. Anonymoose says:

    A quick default even at the start of the recession would have saved a lot of grief; let the pieces fall where they may, pickup as things recover, put the safeguards Clinton undid back into place.

    I could tell people all day it’s the same problem as someone who finances every problem by taking out more and more credit cards, until a point where the credit line can’t go any higher. They won’t listen. All they see is some rich person has something they don’t, and the government has stuff it can give them.

    The #$%^@ should have stopped a long time ago. People have been screaming the obvious for a long time; when all the jobs and money is off shore in China what are people supposed to do for a living? The economy has been unhealthy for a few decades, and the stack of dominoes just keeps getting higher.

    I’m one of the generation most likely to be hardest hit when the Tsunami comes; over forty, soon too old for work, and there won’t be a social security safety net. But it doesn’t matter, the media will just find some way to blame it all on the Republicans.

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