I don’t usually do politics here but this is more fiscal responsibility than it is politics or picking sides. Remember the old debt ceiling debate back in July? One of the solutions was to form a Super committee of people to decide on how to cut 1.2 trillion dollars from our deficit in 10 years. Not annually…cutting 1.2 trillion annually wouldn’t even balance our budget (see annual deficit numbers below). Isn’t that crazy? That deadline is next week and there is still no agreement or anything even resembling an agreement. Remember how ridiculous it was that this whole debt ceiling thing just seemed to sneak up on us? Here we go again!
Let’s put this in perspective.
Currently owe – $15 trillion ($15,000,000,000,000.00)
- (10.3 trillion in debt to others, 4.72 we have monetized and owe back to ourselves…still has to be paid with interest).
- For a live count check out the national debt clock. It goes up $100k every four seconds. By the time you read this whole post we are now $10 million more in debt than when you started.
Monthly/Annual interest on our current debt: October 2011 = $27.7 billion/$454 billion for 2011 in interest alone!
Proposed cuts over 10 years = $1.2 trillion (120 billion/year) – the cuts are only 25% of the annual interest on the debt!
Amount of time it would take to pay the whole thing off = 125 years (the year 2136. I guess that will make me 157 years old)
- That is assuming we never borrowed another dime and assumes we continue to cut 120 billion/year.
We have several obstacles to making even the 125 year plan reasonable.
- There is no plan after the 10 years. This has to continue and even more rapidly than 120 billion/year. Are we willing to do that?
- Politics – These guys can’t even agree on how to cut the first 10 years/1.2 trillion dollars of it (at which time I will be 42!).
- Continued borrowing/growing debt – Our government keeps borrowing to pay our bills. Some say the U.S. borrows about 40% of the money the government spends (Remember, we are borrowing over a trillion annually right now and are paying half a trillion in interest…annually on this debt!). That means if we were to balance our budget we would have to cut 40% of government spending to stop borrowing money. In other words, even if you cut $1.2 trillion in spending, the government continues to borrow 400% more than the proposed spending cuts.
- Cut spending/hurt economy. Some of our economic growth comes through government spending. Cutting programs, building projects, etc can have an adverse effect on an already weakened economy.
Here is how much additional debt we took on per year in the last few years:
2008 – 1 Trillion
2009 – 1.9 Trillion
2010 – 1.7 Trillion
In 2000 our total debt was under $6 trillion. So we have taken on $9 trillion in debt in 11 years…far more than all the debt we had accumulated in all the years prior to 2000. This is disturbing. What is even more disturbing is the path forward. They are going to take 10 years to cut 1.2 trillion and can’t even work out a deal on that. Meanwhile, they are borrowing more than that 10 year cut amount annually! Bottom line – we have to get our spending under control. This is completely irresponsible and unreasonable. So 125 years from now we will still have a monster pile of debt. The problem is not that we can’t even figure out how to cut 120 billion/year. This thing will only grow until will cut far, far more than that. Based on the last three years of deficit spending we would have to cut over $2 trillion annually in order to not be going backwards on this thing. They know it.
Try running your household budget like that.
Disclaimer – I am no economist and don’t do this professionally so feel free to poke holes in my numbers and I will correct it as needed.