Many people I have heard speak or whom I have talked to have said something to the effect of, “Deficits aren’t all that bad for the economy. We’ll be OK; our economy will be fine in the long run.” Many other people I have spoken with are ignorant and/or apathetic about our country’s deficits and debt. So I thought I’d write up a few points to consider about out debt and deficit.
First, a few base definitions that will help for some of you:
GDP (Gross Domestic Product) - Basically everything a country produces in both goods and services for a whole year.
National Debt – When the government spends more than it takes it, it issues treasury bonds and bills (and a few other things) to make up the gap. The sum of all those outstanding bonds and bills is the debt.
National Deficit/Surplus – The amount the government expects to bring in (receipts) minus the amount the government expects to spend (outlays), usually measured over 1 fiscal year.
And to be clear, I am not including in any of these discussions any of the debts or deficits of all the state and local governments, although those are also very big problems in their own right.
Ok, so to start, how large is the current government debt? A little over $13 trillion, or about 90% of GDP. That comes out to about $43,000 for each and every man, woman and child in this country. When a new baby is born in this country today, they are instantly put in bondage by our government, to the tune of $43,000 and growing, just for the privilege of being an American citizen. Welcome to America.
How big is the national deficit this year? Last year it peaked at almost $1.5 trillion, or roughly $5,000 per American, higher than ever in part to the massive bailouts that occurred. That’s more money we’re all borrowing folks, it doesn’t just go away. This year the deficit is forecast to come down to about $1.2 trillion this year, or roughly $4,000 per American added to our existing debt. Theoretically that number will go down in the future. But wait…
Look at the table below (you'll want to click on it and open it to a new window or tab to see it clearly). This is part of the White House’s 2011 budget projections, released in Aug 2009. A couple important things to remember about these projections. First, they are simply guesses, and often reality is far different than projections. Two, regardless of who is in the White House, the projections will always look as good as they can realistically get away with. Three, the farther out a projection is made, the higher the probability that it is wrong. Fourth, all these numbers are as a percentage of our GDP. Fifth, the farthest part of this projection will cover times when our children and grandchildren will be (hopefully) enjoying a few children and grandchildren of their own. Now, with that in mind, let’s cover just 5 of the important highlights from this table, which I have highlighted with red lines and arrows, and numbered them for each point:
#1 – You’ll notice that while the White House thinks they’ll get decrease the deficit in the short term, in the very long term they see it running out of control, far out of control, up to 62.3% of our country’s GDP in 2085, and that’s the rosy outlook.
#2 – You’ll notice that the amount of debt is going to continue to skyrocket until in 2085 it will be more than 8 times the size of our entire country’s output, which is about 13 times bigger compared to our GDP than right now. And that’s the rosy outlook!
#3 – See how the “discretionary” part of that spending stays solid at 6.1% of GDP? What is “discretionary” spending? Sounds optional, right? It isn’t. It includes things like national defense, law enforcement, and all the necessary items that government should do (along with a number they shouldn’t be doing).
#4 – At the same time, “mandatory” spending is going through the roof. The category of “Mandatory” in this chart spending includes items such as Social Security, Medicare, Medicaid. See how huge a portion of the spending that becomes?
#5 – Interest, the pied piper of debt, comes calling. The interest on our debt will become HUGE, 38% of our national economy (and still growing monstrously) by 2085. You can see where this is heading, and in a hurry.
Now let’s talk about the elephant in the room that might explain a few questions: Unfunded liabilities. What in the world are unfunded liabilities? Unfunded liabilities are promises our government has made for future payments, but which it hasn’t set aside any extra funds for. The main culprits are Social Security, Medicaid, and Medicare. Out government officials, often in order to get elected, have made all kinds of promises for the future, without having to actually go set money aside to fulfill those promises. Unfortunately, they’ve gotten their power and have stuck us and our grandchildren with the massive bill for their power mongering. The reason “mandatory” payments start to get so huge is because of these promises. If a company did its accounting pensions like the government does for “mandatory” spending these days, every last one of those company officers would be vilified and crucified on the government’s altar, then thrown in prison. Not so with the government.
So how much are we on the hook for? Right now the estimate from the congressional budget office is somewhere around $110 TRILLION dollars! That’s about $350,000 per American! It is about 10 times our national GDP! Take every single penny of what this country makes for 10 years and that’s how much we have to come up with to pay for these promises that our power-hungry lawmakers have made.
It is hard for our brains to comprehend a number as large at 110 trillion, so let’s do a couple comparisons to help out. If you had $110 trillion in $1 bills, it would weigh more than 1,200 fully loaded Nimitz class aircraft carriers. If you had $110 trillion in $1 bills and stacked them flat on top of each other (like when they get rubber-banded by banks), the stack would be 7,465,278 miles tall, which is like going to the moon and back more than 15 times! If you had $110 trillion in $1 bills and put them together end to end and side to side to make a dollar bill carpet, it would cover almost 440,000 square miles, which would cover the whole south east part of our country (Virginia, West Virginia, Kentucky, Tennessee, North Carolina, South Carolina, Georgia, Alabama, Mississippi, and Florida combined)!!
And folks, that’s just how bad it is right now. It continues to get worse and worse as time goes on and politicians make more and more promises. And it doesn’t count the current national debt, and it doesn’t count the current debts of all the individual states, counties, and cities, nor the unfunded liabilities of all the individual states, counties, and cities.
I’m here to tell you, when it comes to the future of our children, grandchildren, and great-grandchildren, we have a BIG problem on our hands. Decisive action MUST be taken if our country is to survive. And every year that our country puts off decisive action is going to make our problem that much harder to deal with. We’re all sitting on a bomb, and it is ticking, with no idea how long until it goes off.
