Remember how alarmed we were toward the end of 2008, when we realized that Congress for the first time in history was going to run a deficit of a trillion dollars? Congress had never run a deficit even half that size, and some speculated that the deficit for fiscal 2009 could even approach $2T. Luckily, our first trillion-dollar deficit came in at only $1.4T. But now that the feds have run four back-to-back deficits of more than $1T, Americans seem to have become inured — a trillion bucks? no big deal; we’ll just “print” it.
During the Democratic National Convention, America hit another milestone on her express train to economic ruin — the total national debt passed the $16T mark. There was little talk about debt and deficits during the Democrats’ convention. At $16T, the national debt is larger than the gross domestic product. But the “official” national debt, that $16T, is not the figure that folks should worry about. What folks should be concerned about is the debt held by the public, which on September 20 was more than $11.253T.
The debt held by the public was $6.3T on the day Pres. Obama took office. So in exactly 3 years and 8 months, the real debt went up by nearly $5T, a growth rate of more than 10 percent each year, while GDP is plodding along at an annualized rate of 1.3 percent.
In May of 2010, I reported that the EU thinks a nation faces danger when its public debt exceeds 60 percent of its GDP. At the time, Greece’s public debt was 113 percent of its GDP, and America’s was 52 percent. If we round America’s current GDP up to an even $16T, our public debt is now 70+ percent of our GDP.
That article of two years back reported that the Congressional Budget Office predicted that public debt could hit 100 percent of GDP by 2020. But at the rate we’re going, that milestone could be passed rather earlier. All it would take is a flat, no-growth economy and continued borrowing of a trillion a year. If those preconditions are met, America’s publicly held debt will be 100 percent of her GDP in 2017. Throw in a recession, and it could be earlier.
But America doesn’t need to wait for some magical debt-to-GDP ratio to be triggered before our Euro-styled debt crisis rears its ugly head. The Wall Street Journal reports: “Did you know that, during the last fiscal year, around three-quarters of the deficit was financed by the Federal Reserve? Foreign governments accounted for most of the rest, as American citizens’ and institutions’ purchases and sales netted to about zero.” The bond market is sending a clear message to a deaf America.
Lupine, and red in tooth and claw, the specter of debt is standing on our front stoop and about to bang on our door. But unlike the PIIGS (the Eurozone debtor nations in trouble), America doesn’t have a Germany to bail her out. On November 6, America has one last chance to avoid the porcine fate of the PIIGS.
In his 60 Minutes interview on September 23 (transcript), Pres. Obama uttered the word “trillion” only once: “And we’ve already cut a trillion dollars of spending. And I’ve told them I’m prepared to do additional spending cuts and do some entitlement reform.”
“Additional spending cuts”? They haven’t “cut a trillion dollars of spending.” According to Table 1.1 at the White House’s own website, total federal outlays in fiscal 2007 (the last Republican budget) were $2.728T, and more than $1T less than what they’re estimated to be in 2012 — $3.795T.
Perhaps Mr. Obama was referring to sequestration: the “automatic” across-the-board spending cuts scheduled to hit January 1, 2013. Sequestration is a feature of the Budget Control Act of 2011, the debt ceiling deal. It’s irresponsible legislation, and there’s a host of reasons to hope the Act is overridden, but the point is this: the trillion dollars in spending cuts is spread out over a decade. And more to the point, the Act is no more binding than any of the other mechanisms, like Gramm-Rudman, that Congress has routinely ignored. So far, the Pelosi-Reid-Obama axis hasn’t cut squat.
What’s sobering is that when a faction in Congress tries to use raising the debt ceiling to get a tiny amount of deficit reduction, the corrupt media reacts as though such an action is unthinkable. The insanity of the media’s message is that America has no choice but to go another trillion into debt. Not only that, but we can’t cut anything out of the budget; spending must continue apace. Indeed, spending must increase, which includes paying for the oral contraceptives of promiscuous 30-year-old students in elite law schools.
The media also lied about the possibility of default; the feds had more than enough money coming in to pay interest on the debt. (Besides, can’t Ben Bernanke just “print” us up some more money?) With a lazy, corrupt media, America may never be able to fix the debt. (If you’re concerned about the debt, go to Fix the Debt.)
We’re broke, folks. We’re the brokest nation since before the advent of the Big Bang. We’re so broke that there soon may not even be enough money to pay for the electricity needed to power the keyboard Bernanke types on when he “prints” money.