Another glass ceiling was unceremoniously broken a few days ago. For the first time in U.S. history, the national debt reached $18 trillion according to the Treasury Department. How bad is this? It’s pretty bad.
The non-partisan Congressional Budget Office (CBO) calculates that by 2024 the interest payment on the debt will be $880 million, a significant amount of change that will have to come from existing resources or new taxes. Although the budget deficit is lower the CBO projects that it will skyrocket in the not-so-distant future. In the simplest of terms, the problem is that federal borrowing has grown at historic levels while the economy has not.
Consider this: Over 40 years, the ratio of federal debt to GDP was 39 percent, but in 2013 it was 72 percent. By 2024, the CBO calculates the level of debt to GDP will be 78 percent.
This debt is a combination of two numbers. The first is $12.9 trillion in public debt that includes all outstanding Treasury bills, bonds and notes held by individuals, corporations, foreign governments et al. The second is $5 trillion of intra-government debt that covers the “borrowing” from Social Security and Medicare funds to cover current budgets. The level of spending and debt is crippling the nation.
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If the government can’t manage its budget, what can it do? Many scratch their heads and wonder.
When running for president, then-Senator Obama criticized President Bush for adding $4 trillion to the national debt in eight years as “irresponsible” and “unpatriotic.”
“The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents — #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back — $30,000 for every man, woman and child. That’s irresponsible. It’s unpatriotic,” said then-Senator Obama at a campaign stop in Fargo, N.D.
He was right: future generations would have to carry the burden of repaying the debt which, under Obama, increased by $7.5 trillion in just six years. Are they both unpatriotic and irresponsible?
President Bush grew the size of government in the aftermath of the horrific terrorist attack of 9/11. A new federal agency, Homeland Security, was created, increasing the size and scope of the federal bureaucracy. Add to those two wars, one in Afghanistan and another in Iraq that cost a $1 billion a day. There was no additional tax revenue to balance this increased spending. In 2008, President Obama had his own crisis: the Great Recession.
When it appeared that the world was spiraling into an economic depression, the Federal Reserve took extreme measures to cut interest rates and liquidate terrible financial investments which included relief to mortgage holders suffering from negative net equity. The Federal Reserve bought government bonds and mortgage backed securities to keep interest rates low to benefit economic growth. At its height the Fed was buying $85 billion in U.S. debt on a monthly basis.
Fortunately, the economy stabilized but the benefits are incredibly uneven. The wage gap increased and the middle class has seen disposable income diminish by 8 percent. Wage inflation did not occur. Most middle income families did not receive any relief and were left with diminished access to credit and high unemployment. Poverty increased substantially with 47 million people receiving food stamps.
Like it or not this debt has to be repaid and it comes at a time when investment in infrastructure is needed and military operations are quietly increasing. Both are costly investments. Add to that growing entitlement spending as the population ages in the form of Social Security and Medicare. Clearly, it is going to take more than lower energy costs to get the country on high ground.
Forget the blame game; we know how we got here and both parties are to blame. It is going to take a patriotic, bipartisan effort to move the country in the right direction. The national debt is a self-inflicted wound that needs to heal. Wishing it away won’t work for much longer.