Debt is the biggest problem facing the United States. Over the past 30 years, household debt, corporate debt and government debt have all grown much faster than our GDP has. All debt bubbles eventually burst. Right now, we are living in the greatest debt bubble in the history of the world. All of this debt has fueled a “false prosperity” which has enabled many Americans to live like kings and queens. It is amazing that the United States has been able to pile up as much debt as it has. Over the years, many authors have predicted that U.S. government finances would collapse long before the U.S. national debt ever got to its current level of close to $16 trillion dollars.
Why isn’t the U.S. economy in a depression right now? The number one reason is because the federal government has “stolen” more than five trillion dollars from future generations since 2008 and has used that money to pump up our grossly inflated standard of living. Whether the federal government spends money wisely or foolishly, the truth of the matter is that the vast majority of this money still ends up in the pockets of the American people who then use it to buy the things they need for their daily lives. If the U. S. government had not borrowed and spent an extra five trillion dollars that we did not have over the past several years, we would be in the middle of a rip roaring economic depression! If the federal government adopted a balanced budget next year, the debt fueled prosperity that we are currently enjoying would start disappearing very rapidly and all hell would break loose in America.
The false prosperity that the United States and Europe have been enjoying has been fueled by unprecedented amounts of debt, and in order to maintain that level of false prosperity, we are going to need even larger amounts of debt. The truth is that every European government is still piling up more debt at a frightening pace. Here in the United States, the federal government continues to spend more than a trillion dollars a year more than it brings in!
If you are waiting for our economic problems to be solved in the Fall election, you can quit holding your breath. There is simply not going to be a solution to our economic problems at the national level. Both political parties are very similar when you take a close look at them. Both major political parties supported the Wall Street bailouts, both of them fully support the job killing “free trade” globalization agenda and both of them have dramatically increased the national debt. Both parties support the current “money printing “policy of the Federal Reserve and neither party would get rid of the income tax or revise it. We are desperately in need on the national level of a fundamental change in direction when it comes to economic policy. But it does not look as if it is going to happen.
The current debt situation is becoming more complex than the average individual can grasp. The debt held by the public is only a portion of the total debt. Right now the public holds $11,044,184,844,611.66 with intra-governmental holdings at $4,812,182,369,712.78 to comprise our current debt of $15,856,367,214,324.44. Intra-governmental debt refers to money borrowed by the government from federal trust funds, such as Medicare and or Social Security, to finance its programs and services. A trust fund is an account of accumulated assets managed by the Department of the Treasury. Intra-governmental debt is money that government basically owes to itself, because it borrowed the money from itself.
In 2010, outlays for net interest in the United States on the national debt totaled $197 billion dollars. For each dollar in revenues that the United States collected in 2010, 4.6 cents went to pay for the interest on the national debt. However, two problems face the U.S. taxpayers. One, the interest is growing as the national debt is growing and is projected to be at $792 billion dollars by 2021; and, two interest rates are cheap now in comparison to the projections for coming years. Specifically, interest of 3 month Treasury bills will rise from 0.25% in 2012 to 4.4% in 2021. In other words, we face a soaring public debt load with rising interest rates – a deadly double whammy!
State and local debt has been piling up at the same time as our federal government keeps amassing larger amounts of debt. In 2005, state and local debt soared to $1.85 trillion dollars. Medicaid costs are growing rapidly and breaking state budgets. Pension plans for state and local employees have huge funding shortfalls that could total $700 billion dollars. Even more costly for the states is the unfunded retirement health plans promised to state and local workers. A conservative estimate puts the unfunded cost of these health plans at $1 trillion dollars.
To make matters worse, the debt held by the current U.S. population is staggering: our personal debt is at $15.8 trillion dollars, our mortgage debt is at $13.3 trillion dollars, student loan debt is fast approaching a trillion dollars at $871.2 billion dollars, and credit card debt is at a whopping $855.3 billion dollars. Americans have learned to live like their government. What worries me the most is the fact that no one seems to care. This debt crisis has to be addressed or when it goes, not if, it will be like a line of dominos. Each crisis will trigger another crisis until the bubble will burst.