Saturday, November 22, 2014

National Debt Tops $18 Trillion

As the National Debt crossed over the 18 trillion dollars mark we continue to hear from the media how robust economic growth has helped push the U.S. budget deficit down to the lowest level since 2008. Claims of the sharpest turnaround in the government’s fiscal position in at least 46 years are targeted at reassuring American that Washington has got our back. As I write this the deficit, national debt, and spending is far from the minds of many Americans. Currently, we are consumed by such things as the economy, war, strange weather patterns, and deadly disease. The the last few years the Obama administration has touted how the deficit is dropping and the economy is on the mend. This has led some Americans into thinking the worst of our problems are in the rear view mirror. 

Charts are often very misleading
Charts can be very deceiving, little things like the scale or how they are colored often blur how we interpret their message. The chart on the right sends a clear signal that Bush was the problem even as it confirms the Obama deficits have been larger. Only upon looking back decades do we see just how large this problem has grown. To the American people the crossing of several red-lines in the sand without dire consequences has given us a false sense of security. One thing is crystal clear, running up debt is far easier than paying it off.

According to figures released by the U.S. Treasury, the federal government has officially run a deficit of 589 billion dollars for the first 11 months of fiscal year 2014.  We should remember this number is for public consumption and it relies on accounting tricks which massively understate how much debt is really being accumulated.  If you want to know what the real budget deficit is, all you have to do is go to a U.S. Treasury website which calculates the U.S. national debt. On November 1, 2013 the U.S. national debt was sitting at  $17,108,598955,343 just a year later on October 31, 2014 the number has risen to $17,937,160,394,872 . That means that the U.S. national debt has actually grown by 829 billion in less than 12 months.  

The powers that be promote the myth of a falling deficit and the general overall rosy scenario that we can outgrow many of the problems we face. This brings with it optimism and hope. I have ran into more than one person who touts the fact that the deficit is coming down as proof everything will be alright.  A trick or game being used to confuse the issue and muddy the waters is which administration or President to dump the massive 2009 deficit on. Bush left office with the economy in the sewer but the resulting deficit occurred on the watch of Obama. Only when we use the massive 2009 deficit as a baseline are we given the impression the budget is back under control. We must all concede that 2009 was an unplanned budget disaster and the 2009 deficit budget should never ever be used as a baseline

Total Debt Has Leaped Off Chart Hitting $18 Trillion
Negotiating the financial cliff and muddling through what was described as a draconian sequestration has emboldened many people and left them feeling immune to economic reality. Those who claim our current budget deficit is harmless live in peril and are creating the next disaster. Sadly, the reality is we continue to run up massive record deficits and are merely kicking the day of reckoning down the road. Projections made by the government or any group predicting budgets based on events that may or may not happen at some future date are simply that, projections or predictions and not fact. This means that such numbers are totally unreliable. A major concern for this writer is that in 2017 entitlements are poised to balloon and cause a massive hike in government spending. 

Data compiled by Bloomberg using Commerce Department figures would lead a person to think all is well or at least getting better. They tout a shortfall of only $483.4 billion in the 12 months ended Sept. 30th, 2013 noting it was only 2.8 percent of the nation’s gross domestic product of $17.2 trillion. The ratio peaked at 10.1 percent of GDP in December 2009. Data shows the fourth quarter of 2008 was the last time the deficit-to-GDP share reached 2.8 percent was in April 2005. “That’s what happens when the government is holding itself back on spending and the economy is improving,” said George Goncalves, head of  interest-rate strategy at Nomura Holdings Inc. in New York. “The question is, is that as good as it gets or will the deficit continue to shrink?”

Some people forget that the way the GDP is compiled was recently changed to add luster to this ratio. The narrowing budget deficit has bought time for lawmakers to solve some of the long-term threats to the economy such as the cost of retirement benefits, but even the "false fiscal relief" before us may be short lived as austerity-weary lawmakers may boost spending on defense and other programs. Some people are concerned that even as the Republicans take over congress we might see the beginnings of a pendulum shift away from fiscal restraint. The Congressional Budget Office in August predicted the deficit will shrink further this fiscal year, to 2.6 percent of GDP, before rising to 2.9 percent in the presidential election year of 2016. After that entitlements have the potential to wreck havoc with future numbers.

Unless entitlements are reformed, spending on Medicare, Medicaid, and Social Security will drive deficits to catastrophic levels. We have seen deficits reach unprecedented levels and future deficits will be dramatically worse. The ugly truth many people choose to ignore is that starting in 2017 entitlements will become the driving force and carry the deficit in to nosebleed territory. Any claim that the Obama administration has the budget deficit back under control is a total lie. We are mired in the mist of the greatest government debt bubble in the history of the world. With the artificially low interest rates many people seem to have little desire to do anything about this. We are literally gorging on debt, and most Americans seem to think that it is just fine and dandy as we continue to wildly run up debt as if there is no tomorrow. By our actions or lack of action we are destroying the future of this nation.

 Footnote; If you found this post about how the American government deficit and debt is growing interesting or informative please view my post about an article written by Mort Zuckerman, it is really shocking. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged,

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