Will the National Debt Destroy Us?

ADVERTISEMENT

If you think the U.S. national debt is bad now, you ain’t seen nothing yet.

The national debt hit $13 trillion for the first time in our nation’s history back in May, and it will only continue to increase in the near future. The Associated Press reports that the total national debt will surpass $14 trillion sometime next year for the first time in our country’s history. To put that in perspective, that  is $47,000 of debt for every American.

This daunting number came out over the weekend as President Obama’s special debt commission met to discuss the state of the U.S. economy. President Obama established the National Commission for Fiscal Responsibility and Reform back in February and charged it with the weighty task of improving this country’s debt problems and achieving “fiscal sustainability over the long run.” But rather than offer hope for this country, the members of that group are expressing how disheartened they are by the economy and the prospects of repairing it.

“This debt is like a cancer. It is truly going to destroy the country from within,” said Erskine Bowles, the former White House chief of staff to Bill Clinton and a co-chair of the commission, according to the Associated Press. And at least on this point there is some bi-partisan agreement. The other co-chair of the commission, Republican Sen. Alan Simpson, described the task ahead as “harrowing.”

So what’s all this fuss about? In a nutshell, the commission warns that if we don’t take steps to reduce our spending and cut down the debt, we will reach a point in 10 years where we have to doll out $2 trillion to pay off only the interest on the money we’ve borrowed from countries like China just to keep our economy afloat.

To put all this in perspective, the current debt is about 90% of our Gross Domestic Product, and the International Monetary Fund estimates that it will surpass 100% sometime in 2012, something that has not happened in this country since World War II. Economists have warned that if the debt reaches 150% of our GDP, inflation could spiral out of control.

However, the White House shouldn’t be too surprised by these numbers. According to the 2011 federal budget released in March, the administration predicts that the national debt will increase to an astounding $25 trillion by 2020. Perhaps this is why several of Obama’s appointees have come out publicly to urge for more fiscal restraint. As Peter Orzag, the director of the budget office, declared back in May, we are on an “unsustainable fiscal course.” (Orszag recently announced that he will step down from his post this month. Perhaps he wants to run away to a country with a better fiscal future.)

It’s no secret that President Obama has advocated for more government spending so far in order to help get us out of the recession, but he also stated his intention to make serious budget cuts beginning next year, including a proposal for a three-year spending freeze on everything except military spending. He also is urging legislators to gear up for an overhaul of our Medicare and Social Security systems, two big contributors to our debt.

As he stated bluntly at the recent G-20 summit of world leaders, "Next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up. Because I'm calling their bluff."

Ultimately though, his policy will depend largely on the final report issued by his debt commission, which is scheduled to come out in December. And based on their comments so far, we’re guessing their findings won’t fail to be incredibly dire.

—For a comprehensive credit report, visit the BankingMyWay.com Credit Center.

Show Comments

Back to Top