Posted on 08/02/2016 1:48:55 PM PDT by MichCapCon
The U.S. national debt has increased every year this century and is approaching $20 trillion, nearly four times what it was in 2000. It has also grown relative to the national economy. While it was an amount equal to 55 percent of the nation’s gross domestic product in 2000, it reached 101 percent of GDP in 2015.
While most Americans are unaware of the escalating debt, some economists warn that citizens will eventually feel the consequences.
According to U.S. Debt Clock, the U.S. national debt stands at $19.4 trillion as of July 26. It was $5.7 trillion in 2000 and increased to $18.2 trillion by 2015. The number represents the debt issued by the United States Department of the Treasury.
GDP measures the monetary value of all goods and service produced by a nation. The U.S. nominal (not adjusted for inflation) GDP for the year 2000 was $10.29 trillion. It rose to $17.95 trillion in 2015.
“No one is upset about it because the consequences haven’t been felt yet,” said Chris Douglas, the chair of the department of economics at the University of Michigan-Flint. “Eventually, taxes will have to be increased to pay off the debt (deficit spending just means future taxes) or spending will have to be substantially cut, especially popular spending such as Social Security or Medicare, since that is where the real spending is taking place.”
“There may not be a substantial current cost to the debt, but the future costs can be very severe,” said Douglas, who is on the Mackinac Center for Public Policy’s Board of Scholars.
Antony Davies, an associate professor of economics at Duquesne University, compared the national debt to a household’s credit card balance.
“While it would be nice not to have a big balance on your credit card, what really matters is whether you can afford the minimum monthly payments,” Davies said in an email. “Those minimum monthly payments - called debt service - are analogous to the interest on the national debt. The federal government currently pays about 2.5 percent interest on its debt. At that rate, the interest on $20 trillion is $500 billion annually. And this is where the real problems of the national debt arise.”
The Congressional Budget Office projects a $534 billion deficit for the 2016 fiscal year or a $100 billion increase from 2015.
Davies estimated that the federal government will spend $13.6 billion on interest just on 2016’s projected $534 billion of red ink. He said that reduces the amount of money the government will have available to spend on public services by $13.6 billion every year into the future until the debt is paid.
The greater the federal debt, the greater the pressure to keep interest rates low, Davies said.
“The federal debt is so large that just a one-percentage-point increase in interest rates would cost the federal government, in additional interest expense, as much as the annual costs of the Iraq and Afghanistan wars combined,” Davies said. “In short, the federal debt has painted the Federal Reserve into a corner. It can't allow interest rates to rise significantly for fear of financially crippling the federal government.”
The Federal Reserve can never raise interest rates again. I simply can not see how they can do it, without bankrupting the US Government, or most of Europe and Japan.
To those of you who say the Federal Reserve or other central banks don’t control long-term rates - my answer is “nonsense.” QE, Operation Twist, buying GSE debt, Helicoptor Money - all have been, or can be used, to drive rates all along the yield curve. The Fed is an (unconstitutional) soviet style economic planning bureau that will basically destroy our economy, just as the soviets destroyed theirs.
Since just a few BANKS own the FED, I suggest THEY pay it off out of profits for the next 100 years.....??? LOL...
The Federal Reserve can never raise interest rates again. I simply can not see how they can do it, without bankrupting the US Government, or most of Europe and Japan.
“The Federal Reserve can never raise interest rates again.”
Don’t think folks realize that fact....ORFs are doomed to find some place else for their savings..and that means ‘rolling the dice !’
A 20% across the board import tariff balances the budget and strengthens the US domestic economy. THIS HAS TO BE DONE. THERE IS NO OTHER WAY. Pay now or collapse later.Accept a little inflation now or economic death tomorrow.
I was just scolded last week by a young PhD economist in our gov’t security meeting, the following Paul Krugman brainwash toxin:
“We are in a new economic paradigm where national debt, money suppy, the velocity of money, and zero / negative interests no longer matter because our economy is based on innovative productivity.”
I hope someone rubs his manchild nose hard in the pavement when we All Fall Down...
There was virtually NO mention of the debt (that I heard) at either convention, especially at the Democratic convention. Instead, all the talk was about much more free stuff. In fact, inviting the rest of the World in to partake of our free stuff. The total disconnect from reality is just stunning. This is exactly how Venezuela got in the trouble its in right now.
If interest rates were at a sensible rate that gave a sensible return to savers, say 5%, then the interest on the debt expense annually would be $1,000,000,000,000, or 20% to 25% of the federal budget.
Huh? . Wait, I though Obama said the sun was shining, birds are singing and all is rainbows and unicorns? This article is too dark,
Nobody running for office is very interested in addressing the debt. Party at the end of the world, everyone!
When they can no longer find enough people to willingly buy bonds at those artificially low rates, they will have to print money.
Oh wait, they already are - the Fed is now a huge “buyer” of Treasury debt, with money that they simply make themselves.
When that becomes prohibitive, they will have to force people to buy their debt.
Oh wait, they already do. They have increased the amount of Treasury debt that banks must hold, to be considered “solvent” by the Government regulators. Technically, they refer to that as financial repression (not a joke).
Then they will have to repay debt holders with IOUs. Already do, for a large percentage.
Then they will have to take more from citizens. Ditto.
Finally they will have to stop paying the bills. Party over.
A 20% import tariff would stop the bleeding and borrowing.
Even a single percentage point raise would pretty much double the amount of interest that would have to be paid yearly.
“A 20% import tariff would stop the bleeding and borrowing.”
I am afraid not.
Without spending restraint, no income is sufficient. The largest tax increase in human history was enacted under Obama (more than tariffs produce) - it was all spent, and more.
The purpose of negative interest rates is to discourage savings. It’s to force people to cash out their paycheques completely everytime they get paid.
20 trillion? What drugs have you been taking? Unfunded obligations are closer to 120 trillion.
All those baby boomer pensions and all that unearned SSDI funding? Medicaid?
We are going to default on those obligations or we are going to crash.
20% is at current spending levels. Tariffs can be increased easily.
Or trigger a world wide depression. Possibly a world war.
This economic stuff is not easily predictable. It often does weird counter-intuitive things.
The one thing I know we need to do is stop letting non-taxpayers vote. Then we need to reign in the spending party in Washington D.C.
But none of that is going to happen. We are going to crash.
“We are in a new economic paradigm where national debt, money suppy, the velocity of money, and zero / negative interests no longer matter because our economy is based on innovative productivity.”
In 1999, I’ll bet he was championing “end of the business cycle as we know it” nonsense and dismissed all reports of the .com implosion that started in 2000 as right wing rhetoric that destroyed the “Clinton/Rubin” economy.
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