Our U.S. Federal debt is reaching a tipping point. Just four years ago, economists feared that our public debt would reach 60% of the GDP by 2022. Failure to curtail spending and to pass a budget, in addition to piling on massive new spending, has hurled us past that 60% benchmark twelve years earlier than feared. We passed the mark in 2010.
Advertisement-content continues below
That 60% benchmark is critical, for it is recognized across the European Zone and developed nations as the “prudential limit” for public debt. And here we are, just two years later, and our public debt is even greater. The public debt clock shows we’ve just surpassed the $16 trillion debt level, which means with a $15 trillion economy, we’re at the 107% mark of public debt to our GDP. For every $100 we spend, $41 of it is borrowed. All reasonable citizens must recognize the fact that we cannot continue this way.
Even that is an incomplete picture, as the total debt associated with unfunded liabilities associated with Social Security, Medicare, and Obamacare places our debt level between $55 and $80 trillion.
According to Joseph J. Minarik, Director of Research at the Committee for Economic Development, “Today’s financial risk arises largely from U.S. fiscal misbehavior.” We did not have a budget passed by Congress while Nancy Pelosi was Speaker; and during the last two years, the Senate has refused to pass one.
The President has presented his own “budget” to Congress that did not receive a single vote, even from his own party, because it was so out of touch with fiscal realities. Yet with his massive spending, from a $1.3 to $1.7 trillion deficit every year that he’s been president, our debt has skyrocketed.
Advertisement-content continues below
Just four years ago, Obama declared George Bush to be “irresponsible and unpatriotic” for $4 trillion in new debt in eight years. It must be more responsible and patriotic to run up $5 trillion in half the time!
The Simpson-Bowles Commission came up with recommendations to balance the budget in 12 years and reduce our debt load. The president ignored his own commission and has continued to spend as if there is no tomorrow. And there is no hint of an indication that the president has any plans for curtailing his spendthrift ways for the next four years.
The United States now has the seventh-highest public debt burden among advanced nations, according to Minarik and the latest data. The countries ahead of us should sound familiar, for their debt is destroying their economies: Greece, Iceland, Italy and Japan are worse off. We’ve even far surpassed Portugal. Minarik says without fiscal discipline, our politicians have placed us on course to “stumble into a financial meltdown.”
Minarick reveals, “In due time, U.S. public finances will be caught in a vicious cycle. Rising interest rates raise the federal government’s debt-service cost, which increases the risk premia on Treasury interest rates, which raises debt-service costs still further. Higher interest rates extend to private borrowing costs, which slows economic activity, which increases the federal government’s budget deficit. In another Catch-22 contradiction, the drop in economic activity is not cushioned by a fall in interest rates to match the fall in the demand for credit. Rather, the fall in activity triggers a massive growth of fear of default risk, and so interest rates rise rather than fall, accelerating the vicious cycle. Perhaps this crossing over in the effects on interest rates would constitute a true ‘tipping point.’”
The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.