US debt now greater than GDP
posted at 10:12 am on August 4, 2011 by Bruce McQuain
Yes, we’ve finally done it – and almost immediately after the Spender-in-Chief signed the new law:
US debt shot up $238 billion to reach 100 percent of gross domestic project after the government’s debt ceiling was lifted, Treasury figures showed Wednesday.
Treasury borrowing jumped Tuesday, the data showed, immediately after President Barack Obama signed into law an increase in the debt ceiling as the country’s spending commitments reached a breaking point and it threatened to default on its debt.
The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion, and putting it in a league with highly indebted countries like Italy and Belgium.
Public debt subject to the official debt limit — a slightly tighter definition — was $14.53 trillion as of the end of Tuesday, rising from the previous official cap of $14.29 trillion a day earlier.
Treasury had used extraordinary measures to hold under the $14.29 trillion cap since reaching it on May 16, while politicians battled over it and over addressing the country’s bloating deficit.
The official limit was hiked $400 billion on Tuesday and will be increased in stages over the next 18 months.
No linger time there, huh? We now owe more than we produce in a year. And let’s be honest, we didn’t get here just during the last 3 years – although we did switch from a horse-drawn sled to a rocket sled – this has been a long process aided and abetted by both parties. Yes, one has been worse than the others at times, but it pays to remember that George W. Bush gave us Medicare part D and No Child Left Behind … both horribly expensive programs.
But it’s not slowing down is it? And that’s a problem for economic recovery as Dale Franks reminds us:
…a body of peer-reviewed work has been developed (PDF) that shows that an excess of government debt serves as a drag on the economy, shaving at least a full percentage point off of annual GDP growth. And we’ve learned that this negative economic effect has a non-linear effect on economic growth as debt increases.
There seems to be little real recognition of how drastic and the enduring government cuts in spending must be to change this so the debt isn’t a drag on the economy. Granted they must be intelligent so as not to compromise our national security or disrupt what we deem as basic essential services government provides, but that leaves one heck of a lot of the pie to cut. And that would include massive cuts in entitlements. You’re not entitled to something someone else can’t afford. And that’s where we are. I wish we’d quit calling those programs which are pure welfare “entitlements”. There is a difference between paying into something for years and a program in which recipients are getting something for nothing. It is the “getting something for nothing” programs that deserve a first hard look. Unfortunately the programs in which taxpayers were forced to contribute and were subsequently looted by spendthrift politicians need to be reviewed and cut as well.
We can pretend this isn’t a real problem, like most of the politicians in Washington DC, or we can face the reality (and pain) of the situation and start to work doing what is necessary to bring fiscal sanity to our nation’s finances.
A good start would be cleaning the lot of them out DC and starting over. You’re likely to find at least as competent a group as are up there now by randomly picking 535 names from a phone book. Yes, I know that’s not going to happen, but we’ve got to come up with some way to scare those people straight. Suggestions are welcome.