“This is going to require people of both parties to come together and take a look at the growing gap between what the government spends and what the government raises in revenue.” – Barack Obama, April 27, 2010, at the first meeting of his Deficit Commission.
Gap indeed! Under the stewardship of President Obama, this deficit “gap” has expanded to Grand Canyon proportions, and is ever widening still for the long foreseeable future. In May, the International Monetary Fund released a 91-page report that compared the debt levels of countries around the world. Several countries are in very difficult situations accordingly such as Japan and Greece; however, the United States is shown to be in a catastrophic financial nose dive. It shows that America is increasing its debt at a steeper rate than almost any other nation in the world.
The Heritage Foundation released figures showing that in 2010 the United States government is spending $30,543 per household while only taking in $17,879 per household in revenue. This leaves a current budget deficit of $12,664 per household. Further, the Heritage Foundation states that 56% of federal spending currently goes towards entitlements such as Social Security and Medicaid. This accounts for 14% of our gross domestic product. Clearly this egregiously out of balance and out of control spending must be reigned in and reversed immediately if we plan to survive economically as a country.
When President Bush left office at the end of 2008, the national debt was 69.2% of GDP. Now, only a year and a half into President Obama’s only term, the national debt stands at an astounding 92.6% of GDP and is growing exponentially. If this trend is allowed to continue with this asinine spending we will exceed a national debt in excess of 100% of GDP by 2012. This is NOT sustainable for our nation. As things currently stand, 42 cents out of every dollar America spends is borrowed from the Chinese and other foreign investors. As we reach that magical tipping point of having our debt greater than our GDP, we are in serious and inevitable jeopardy of our country losing its Triple A bond rating.
This is exceptionally bad as the interest rates we will pay on our debt will increase significantly at that point. Further, foreign nations will be very unlikely to continue to finance our debt. To make matters even worse, most of America’s debt is financed with a very short maturation time compared to nearly all other nations. While the IMF reports that the average maturity rate for the United Kingdom’s debt is 12.8 years, and the insolvent Greek debt’s average maturity rate is 7.4 years, the United States has its debt financed with maturity rates averaging a mere 4.4 years. At the end of that 4.4 years, that debt will have to be re-financed, and with the likely loss of our Triple A bond rating, the interest rates for re-financing that debt will likely be crushing.
The progressives claim that the failed Keynesian policies of priming the pump and spending our way out of debt is what will save our economy, despite all economic and historical data to the contrary.
Their economic ineptitude is what is hurtling us towards the abyss. We must absolutely establish draconian cuts in spending right now if we are to remain solvent and not have our economy collapse where the dollar becomes as useless as the Soviet Union ruble. Trying to spend our way out of a recession makes as much sense as a drunkard trying to drink himself to the point of sobriety.
Our pathetic Democratically controlled House of Representatives has failed to pass a budget for the first time since 1974. This was done intentionally as they are seemingly genetically unable to cut spending and thus know that the passing of their budget will be the final nail in their political coffin come this November’s elections. Most Americans get the fact that we cannot continue down this path of profligate spending and survive much longer. Congress, especially the Democrats, and our president had better come to this realization right now, or we may not have a nation left by the time the next presidential elections roll around in 2012… when our debt will exceed 100% of our GDP.