In short, that means that of every penny of productivity (goods and services) that the U.S. generates each year, we will owe $.98 out of every dollar to someone else. Just think of it as economic servitude, if you will.
The Congressional Budget Office (CBO) today released a ten-year budget baseline showing $6 trillion in deficits over the next decade. Yet because Congress requires the CBO to include all sorts of unrealistic assumptions (that all tax cuts will expire, that the AMT will never again be patched, that discretionary spending will barely move for a decade), some adjustments must be made.After building a true budget baseline, the sobering result shows ten-year deficits of $13 trillion. The annual budget deficit never falls below $1 trillion. By 2019, the debt is projected at $22 trillion, or 98 percent of GDP.
And it's all because of the spending.
Let's be fair - the entire U.S. government has been recklessly and irresponsibly spending for decades. The budget was actually balanced in the mid-1990s by Bill Clinton and the Republican-led Congress, but the deficit was still huge, so our debt load remained. In fact, I haven't been able to find anywhere the last time the U.S. was debt free. I'm guessing it was long before 1900 (if anyone is able to clarify that, I'd love to hear about it). The point is that this is a long-term systemic problem that very few politicians have been willing to tackle, and that none have actually corrected.
But, let's also be real - Barack Obama and the Democrat-led Congress dumped gasoline onto the fire. Remember, Bush's tax cuts had actually brought the deficit down to under $200 billion, heading us in the right direction despite increased spending...until the housing meltdown at the end of 2008:
From that point on, it's been a spending binge of historic proportions. Remember this:
No, it's a destructive irresponsibility that we're seeing now. Heritage gives us another chart that shows how the annual budget affects the deficit:
We're looking down the barrel of permanent $1 trillion deficits each year.
Okay, real world time. This would be like someone earning $50k a year racking up a mountain of credit card debt, adding an additional $25k each year. Let's say that after doing that for a couple of decades, this person is going to be somewhere around $1 million in debt. Can he pay it all back? It'll be painful, and require some serious cutbacks in all areas of his life, but at least he can start getting his house in order and start making some progress. However, instead of cutting back on his spending, let's say this person would then start adding $40k in additional debt each year, blowing out the bottom of the hole he's already in. Ask yourself: how long do you think his lenders will let him run wild? How long will it be before the bank comes calling, and this guy is forcefully thrown into financial ruin?
It will work the same way for us as a nation.
Here's the sobering truth:
The numbers are truly staggering. Between 2009 and 2020, the national debt would increase by $130,000 per household. By 2020, net interest alone would cost $1 trillion – one-quarter of all tax revenues. Federal spending would reach 25.9 percent of GDP, shattering the post-war record. And these estimates do not include the cost of the president’s health-care and cap-and-trade proposals. His spending agenda — which would be unaffordable even in good budget times — is completely unrealistic given this sea of red ink.Basically, the children of today will become the serfs of tomorrow. This is absurdly unsustainable unless we're content with destroying all hopes of a lifestyle like we've known for our younger generations. This is no exaggeration.
Here are a few other fun facts:
- Context: Before 2009, the largest budget deficit recorded since the end of World War II had been 6.0 percent of GDP in 1983. The Bush Administration oversaw budget deficits averaging 3.2 percent of GDP.
- The 2009 budget deficit of 9.9 percent of GDP shattered the postwar record. Furthermore, the budget deficit is projected to remain above 5.8 percent of GDP indefinitely.
- By 2020, the budget forecasts a $1.9 trillion annual budget deficit, a public debt of 98 percent of GDP, and annual net interest spending surpassing $1 trillion.
- Over what would be President Obama's eight years in office, baseline budget deficits are projected to total $9.7 trillion--nearly triple the $3.3 trillion in deficits accumulated by President George W. Bush. The public debt--7.5 trillion at the end of 2009--is projected to triple to $22.1 trillion by 2020.
- After remaining between 23 and 49 percent of GDP since the end of World War II, the public debt currently stands at 53 percent of GDP and is projected to reach a peacetime-record 98 percent by 2020.
- As the budget deficit increases over the next decade, so will net interest spending, from $187 billion (1.3 percent of GDP) in 2009 to $1,044 billion (4.6 percent of GDP) by 2020. Even that assumes that interest rates remain lower than in the 1990s. An interest rate spike could cost trillions of dollars in additional net interest costs.
- The coming tsunami of Social Security, Medicare, and Medicaid costs are projected to push the federal public debt to more than 300 percent of GDP by 2050 and over 700 percent of GDP by 2080.
We don't know when we those who finance our debt will lose patience, but there are already signs that it's coming soon. If we don't make some tough decisions now and start making some serious progress on this debt -- starting with a huge cut in spending -- we're going to find ourselves forced into some unpleasant things, and potentially losing the troublesome burden of our freedom.
It's time we elected some people who acknowledged this looming disaster, and are willing to tackle it. Neither party has been willing to do so, though one could argue that glimmers of responsibility have been seen in the GOP in recent memory. I'd say it's time to get serious and demand some action from our elected leaders in Washington.
There's my two cents.