They say that the very first step an alcoholic must take is to admit that they are in fact an alcoholic. Before he or she can make any progress, the alcoholic must address his or her problem. As a country, our legislative representatives and President must admit to the American people that not only are we broke- but that the way we have been managing our fiscal affairs is severely broken. We keep thinking that something magical is going to happen and the $14,282,592,586,969 dollars that we have amassed as a debt will go away. Well folks, I have news for you. It will not go away and it is getting worse by the minute. According to the National Debt Clock, every sixty seconds, our debt rises by a cool $3,392,990.00.
What makes this so tragic is that our “USA Master Card” also keeps ticking. Since the fiscal year began last October 1, 2010, we have accumulated $169,361,712,628.99 in interest expense on the National Debt through the end of January. This is not $169 billion dollars for roads, or Federal programs for the poor, this is $169 billion dollars for just pure interest to keep from defaulting on our debt. Also considering that foreign countries own a greater and greater percentage of our National Debt, many of these interest dollars go to foreign countries. The U.S. has accumulated this gigantic debt over decades. With an actual unemployment rate (U3) in excess of twelve percent and more than eighteen-million Americans out of work, cutting spending now becomes even more of a challenge.
Now folks, $4.5 trillion dollars of this debt is owed to trust funds like Social Security. Employees and employers have contributed $2.5 trillion dollars to Social Security but it has been “loaned” to the Federal Government’s General Fund. Why? The reason is that our current income taxes cannot cover the full cost of General Government Services. Over and over, we are told that there is not enough money to keep Social Security going and that at some point in the future, that system will go broke. Maybe not, if the Federal Government paid back all the money that it “borrowed” from Social Security. But what are the chances of this happening?
The real problem, just like the alcoholic must address, is that we are unable to balance our current annual fiscal budget. Back in February of 2009 when President Barack Obama sent his budget to Congress, the budget projected a $1.75 trillion dollar deficit! This figure represented 12.3% of the estimated gross domestic product for 2009, double the previous post-war record of 6% in 1983, and the highest level since the deficit totaled 21.5% of GDP in 1945 at the end of World War II. This situation is like a family with an annual income of $40,000.00 a year, projecting their annual family debt at $80,000.00.
Back in 1917, the United States set it first debt ceiling limit. Little did the Government realize back then that it would take on a life of its own! Since March of 1962, the debt ceiling has been raised 74 times. Ten of those times have occurred since 2001. The United States Government is facing another debt ceiling crisis in early March of 2011. The debt ceiling cap is set by Congress on the amount of debt that the Federal Government can legally borrow. The current debt limit ceiling right now is $14,294,000,000,000. We are just days away from reaching that limit. If the Government can’t borrow, the government will need to raise taxes or cut spending to continue to meet its obligations in full. The current stalemate over $61 billion dollars is like the family with the $40,000 income, arguing over whether they should drop some of the premium movie channels from their cable bill. The overall effect of the cable bill is nothing in comparison to the $80,000.00 in debt that the family is facing! Some people argue that the debt limit is ineffective in controlling spending and deficits. I would almost tend to agree.
The United States Congress is ready for fiscal rehab. We are on a collision course to financial disaster. At this rate, a financial default on the National Debt is not an option – it is just a matter of when. In one of my articles on the National Debt some time ago, I didn’t think it could get any worse. At that time, the debt was just a mere $9.7 trillion dollars.