On January 11th, President Barack Obama sent Congress his request to raise the limit on the U.S. National Debt by another $1.1 trillion. I join the countless citizens and commentators who find that additional request for more debt both troubling and exceedingly ironic. It is troubling because we are, day-by-day, digging a deeper hole of debt – which can only be remedied by either decreased federal spending, or by such a surge in economic activity that tax revenue grows exponentially (neither of which is foreseeable in the next 12-24 months). In light of this, it is exceedingly ironic that, six short years ago, Illinois Senator Barack Obama speechified the following for the Congressional Record: “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here’. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. America deserves better!”
It is curious that I have not heard that sound bite from any of the mainline news broadcasts or media. Many would undoubtedly believe it to be just as germane today is then Senator Obama thought it was then. The fact is that, no matter what political pundits and the big-time commentators on the news say, we are rapidly approaching the financial strength (read that “weakness”) status of those countries in Europe about whom we read and hear on a daily basis.
The Federal Government itself has admitted that our federal “operating debt” now exceeds our Gross Domestic Product (GDP). The “Debt-to-GDP Ratio” is commonly used as a measure of financial strength, economic health, and political discipline. As we know, the leaders of Greece, Italy, Portugal, Ireland, and Spain have been receiving extremely bad reviews from the global bond market (the rate they must pay on their sovereign debt has climbed much higher during the past year), from the International Monetary Fund (IMF), World Bank, S&P and Fitch bond rating agencies, and the press. Many question the future of the European Union because of the escalating financial crises within these nations.
It is important for U.S. citizens to absorb all of that, and then observe the parallels between these nations, criticized worldwide for poor financial management, and the United States. Keeping in mind that my arbitrary assignment of a 101% ratio of Debt-to-GDP for the U.S. does not include our massive accumulated liabilities for Social Security and Medicare, which according to government authorities is http://www.cga.ct.gov/2010/rpt/2010-R-0197.htm approximately $18.7 trillion… or at least 15% larger than our current operating debt), here are the 2011 estimated “Debt-to-GDP” figures for other “financially distressed” nations (based in IMF, Eurostat figures):
In Part II, we’ll review what some of those nations (and the U.K.) have done to attempt a reversal of their deficits and to control their debt.