There is no question that the United States 13 trillion dollar debt is bad, but when evaluating these dreadful numbers, believe it or not, it is the good news. Yes, our 13 trillion dollar debt actually paints a rosy picture for the American financial outlook because it covers up some fairly disturbing facts. It is important to remember that this number only shows the current outstanding federal government debt.
First, with our debt at 13 trillion dollars, China owns nearly 1 trillion of it. This is a national security problem when our top economic rival has the leverage to control our future. This prevents us from challenging China to place harsh sanctions on North Korea, and it certainly prevents us from challenging China’s humanitarian breaches or their responsibility to our global environment.
Secondly, the national debt does not reflect billions in future unfunded liabilities that will have to be meet. Currently, it is estimated that the federal government has a shortfall of 16 trillion for social security and another 50 trillion for Medicare. And what’s worse is that this 66 trillion dollar shortfall will continue to grow exponentially as millions of baby boomers make their way onto these payrolls.
Thirdly, there is an estimated trillions more in unfunded liabilities to support government shortfalls for retirement pensions and other major entitlement spending programs including food stamps, low income housing, Medicaid, welfare, and the newly passed healthcare reform plan. Remember, entitlements including, social security and Medicare, account for over half of our federal budget and they are growing at a rate of nearly 7% annually.
Fourth, the interest from the 13 trillion dollar debt is expected to be over a half trillion dollars by 2015, which will account for one third of the total tax revenues collected for that fiscal year. What’s worse, most of the U.S. debt was borrowed at very low interest rates, and these interest rates may go up especially if U.S. Treasury Bonds are downgraded from their current AAA rating. For instance, since Greece’s financial collapse their bonds have been downgraded to junk and therefore, they now have much higher interest rates on their loans.
Fifth, the national debt does not include billions more in debt owned by local and state governments around the country. States are projected to have budget shortfall of over 200 billion this year. Interestingly, this pales in comparison to individual credit card debt that is over 1 trillion dollars.
Sixth, the 13 trillion dollar debt is at 89% of our Gross National Product (GDP), which is currently at 14.6 trillion dollars. The GDP is the total economic output for any nation. Economist claim that once a nation’s debt reaches 90% of GDP, it is nearly impossible to get that debt under control since an economy can only raise taxes so much before that becomes counterproductive. Greece, which is currently being bailed out with 1 trillion in loans, currently has a debt that is 120% of GDP. Other European countries with massive debt to GDP ratios include Portugal (80%), Ireland (80%), Italy (120%), and Spain (80%). In other words, the U.S. debt to GDP ratio ranks higher than other fiscally irresponsible welfare states. This is certainly bad news because it proves that the U.S. is teetering on fiscal oblivion, similar to Greece. The United State’s debt to GDP ratio should reach 100% by next year.
Our national debt amounts to nearly 45,000 dollars for every man, women, and child in the United States. Our state debt will add nearly 1000 dollars on top of that debt and our credit card debt will add another 3,300 dollars on top of that. And this does not include all those unfunded liabilities that amount to anywhere from 70 to 100 trillion or about 250,000 dollars for every person in our country. When unfunded liabilities are added to our current debt, it amounts to around 300,000 dollars for every person in our country!
No comments:
Post a Comment