Tuesday, September 4, 2012

Defecit and Debt...Is the End in Sight?

   Today the debt of the United States federal government topped $16 Trillion.  That's 16,000,000,000,000, or in other words, 16 followed by a lot of zeroes.  This debt has increased $5.4 Trillion since January 20, 2009, the day our current president was sworn into office, and more than $10 Trillion since Bush's first inauguration.  This can hardly be viewed as a partisan issue.

     However, in spite of the fact that we are now literally looking down the barrel of a crisis that could not only cripple, but collapse this government and the largest economy in the world, we are still having the same old political discussions.  We continue to discuss the morality of social programs like Social Security, Medicare, and Food Stamps, not to mention a defense budget that dwarfs all others in history.  However, we're overlooking the bigger picture.  It's nice to think that a government should help those who may be unable to help themselves, and nobody in their right mind wishes poverty, hunger or homelessness on anyone, but how can we rationally think that we will be able to pay for these rapidly expanding expenses?

     Federal spending on Medicare was $523 Billion in 2010, and is expected to reach $932 Billion by 2020.  Obviously the cost expands as the number of recipients goes up and the number of people contributing stays level or goes down, especially considering that the outlook for the job market over the next decade is shaky at best.  Social Security costs you, the taxpayer, another $700+ Billion every single year, and is another program that is solely funded by employed Americans.  Once again, as less people are working, and more people are retiring, or choosing to take their Social Security payments earlier because they have trouble finding work late in life, the strain on this program grows.

     Another program that is rapidly expanding is Food Stamp assistance.  Not only is participation in this program growing quickly, our government is advertising and encouraging people to join.  In June, Food Stamp usage grew to a record 46.7 million people, and at the end of the fiscal year 2011 cost American taxpayers $75.7 Billion.

     One more program that is severely bloated is defense.  The current cost of defense in the United States is more than $600 Billion, and represents roughly 45% of the defense budget for the entire planet.  Do we really think this is necessary?  What makes our nation (and the world for that matter) more secure, out of control spending that could lead us to collapse sooner than later, or a financially stable and sound United States?  I have to think it's the latter, because otherwise, all our enemies have to do is wait us out, and we will just destroy ourselves.  If the U.S. goes broke, the world becomes a very dark place, and fast.

    All of these statistics are pretty disheartening considering the fact that it's been reported that roughly half of Americans aren't paying income taxes.  There are only really three ways the government can get money: taxing, borrowing it, or printing it.  Increasing the government's reliance on any of these options is not very appealing.  In terms of taxation, there's only so much money that you can take from others.  More borrowing from other countries?  How long can we get away with that before countries like China realize we have taken on more debt than we can ever pay back?  And what I consider the most dangerous option, printing, how many trillions of dollars can the Federal Reserve print before we see vast inflation, or even scarier, a worthless dollar bill?

    And speaking of inflation, the Federal government currently spends over $300 Billion every single year just in interest payments on the debt, and that is with historically (and artificially) low interest rates.  At the same time, we are borrowing more than a Trillion every year, and under current budget projections will do so for years to come.  By 2016 we are expected to be over $20 Trillion in debt.  What happens when interest rates inevitably go up, because they will?  Keep in mind, all of these projections use estimates with rosy economic outlooks, not realistic ones.  

    So again, the whole point here is not to stoke a debate on ideology, but to truly question, no matter how you feel about entitlements, defense, etc., whether or not what we're doing is sustainable, because the truth is that it's not.  Then what are we left with?


  1. Mathematically unsustainable.

    In 2012 we have $16t in debt and payed $224b in interest. In 2016 we are projected to have $22.3t in debt and will pay $508b in interest.

    Like you mentioned these numbers are considering historically low interest rates. (and taken from USdebtclock.org) If the interest rate rises above 5%, which is very likely in the future, we could be paying close to $1t in interest.

    As a reference point, the most recent "claim" of a surplus in FY2000 was $230b.

    Clearly stated, our fractional reserve banking system design forces us into ever-increasing amounts of debt with no way out.

  2. Agree with Jeffro, positively unsustainable. I'm interested to hear more about what our presidential candidates and other political leaders are planning in order to combat this problem. It's frustrating to see their efforts focused on the low impact/low risk, yet TRENDY issues such as abortion and gay marriage (pro & pro, personally), when there are debilitating issues of economic stability, questionable military activity, and joblessness. These are the tough questions that need answers.