The Time Is Now
Chris Hopkins
Issue date: 2/1/10 Section: Perspectives
During his State of the Union speech, President Obama focused on the American economy. Successfully pinpointing its plight, he proposed a jobs bill to help get Americans back to work and stimulate the economy. The President also proposed increasing exports through trade agreements, investing in the skills and education of Americans, reforming health care and bringing down budget deficits. All of these are ambitious, but necessary, goals.
I think it is safe to assume that for most Americans economic success is a top priority. At the heart of economic success are two things: Jobs and our national debt.
As it stands, the total U.S. debt is a staggering $12.3 trillion and some 87 percent of our total Gross Domestic Product. Based on the 2010 U.S. budget, total national debt is projected to nearly double in dollar terms between 2008 and 2015 and will grow to nearly 100 percent of GDP.
Additionally, as the debt ratio increases the exchange value of the dollar may fall. Paying back debt with cheaper currency could cause investors and other governments to demand higher interest rates if they anticipate further dollar depreciation. Paying higher interest rates could slow economic growth.
This is a real threat.
At the heart of our national debt are our yearly budget deficits. Since 1970, the U.S. federal government has run deficits every year except 1998-2001. Since 2001 government spending has spiraled out of control. The two major Bush tax cuts - compounded with the launch of two wars - produced an average annual deficit of $550 billion. To top it off, in 2008 the deficit reached an unprecedented $1 trillion. That's $1,000,000,000,000.00. Granted, much of the 2008 deficit is the result of the $700 billion Toxic Asset Relief Program.
More detrimental than the unplanned spending are entitlement programs, such as Medicaid, Medicare and Social Security. Between 1966 and 2006, Medicare, Medicaid and Social Security have grown from 16 percent of the budget to 40 percent. According to the Congressional Budget Office, the costs of these programs are projected to get worse because demographic trends show that the number of workers paying into the program is declining relative to those receiving benefits. If this trend continues, mandatory spending for these programs will exceed taxes dedicated to these programs by more than $40 trillion over the next 75 years. According to the Government Accountability Office, these will double debt-to-GDP ratios by 2040 and double them again by 2060, reaching 600 percent by 2080.
I think it is safe to assume that for most Americans economic success is a top priority. At the heart of economic success are two things: Jobs and our national debt.
As it stands, the total U.S. debt is a staggering $12.3 trillion and some 87 percent of our total Gross Domestic Product. Based on the 2010 U.S. budget, total national debt is projected to nearly double in dollar terms between 2008 and 2015 and will grow to nearly 100 percent of GDP.
Additionally, as the debt ratio increases the exchange value of the dollar may fall. Paying back debt with cheaper currency could cause investors and other governments to demand higher interest rates if they anticipate further dollar depreciation. Paying higher interest rates could slow economic growth.
This is a real threat.
At the heart of our national debt are our yearly budget deficits. Since 1970, the U.S. federal government has run deficits every year except 1998-2001. Since 2001 government spending has spiraled out of control. The two major Bush tax cuts - compounded with the launch of two wars - produced an average annual deficit of $550 billion. To top it off, in 2008 the deficit reached an unprecedented $1 trillion. That's $1,000,000,000,000.00. Granted, much of the 2008 deficit is the result of the $700 billion Toxic Asset Relief Program.
More detrimental than the unplanned spending are entitlement programs, such as Medicaid, Medicare and Social Security. Between 1966 and 2006, Medicare, Medicaid and Social Security have grown from 16 percent of the budget to 40 percent. According to the Congressional Budget Office, the costs of these programs are projected to get worse because demographic trends show that the number of workers paying into the program is declining relative to those receiving benefits. If this trend continues, mandatory spending for these programs will exceed taxes dedicated to these programs by more than $40 trillion over the next 75 years. According to the Government Accountability Office, these will double debt-to-GDP ratios by 2040 and double them again by 2060, reaching 600 percent by 2080.
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