Amidst the hype concerning the so-called era of austerity and budget cuts, the national debt is rapidly marching towards the $15 trillion milestone. As of late last week, the national debt stood at $14.94 trillion. For those of you keeping score, that number has grown by $646 billion since the debt ceiling was raised on August 2, as part of the great bipartisan Budget Control Act of 2011. In other words, the debt has increased by over $8 billion per day during the past 11 weeks.
Let’s put these numbers in historical perspective.
Barack Obama likes to blame all of our economic woes on his predecessor. The burgeoning national debt is no different, as he blames its precipitous rise on the Bush tax cuts. Well, President Bush and his merry band of big-government conservatives were anything but budget hawks; nonetheless, it took them 92 months – almost the entire 8-year tenure – to accrue $4.3 trillion in debt. Obama has accumulated that much debt in just 33 months. Put another way, it wasn’t until 1997 that we amassed as much debt as Obama has in 2.5 years.
There is also another grim, but often overlooked statistic of Obama’s empire of debt.
The national debt consists of two components; debt held by the public and intra-government debt. The debt held by the public is the sum of the treasury securities held by those outside the federal government, with the lion’s share owned by foreign countries. The debt held by the public currently stands at $10.2 trillion. The other component, the intra-governmental share, is owed to other federal agencies and accounts, most prominently, the non-existent Social Security Trust Fund, as well as accounts holding pensions for military veterans and government workers. That share of the debt currently stands at $4.73 trillion.
For many years, liberal economists have implored us to ignore the gross national debt, which includes the intra-governmental share, because that is money we ‘owe ourselves.’ That in itself is a dubious argument because we will still need to issue more (public) debt, print more money, or raise taxes to pay for SS and federal pensions – unless we cut benefits. Nevertheless, let’s play along for the moment, and focus primarily on the “bad debt,” the share that is held by the public.
Are you ready?
Obama has increased the debt held by the public by $3.9 trillion; from $6.3 trillion to $10.2 trillion. Accordingly, 91% of Obama’s $4.3 trillion debt has come from the so-called bad debt! Bush had increased that share of the debt by roughly $3 trillion during his entire 8 years as president.
So what is Obama’s plan to reverse the tide of indebtedness and fiscal insolvency? He wants to spend more and raise taxes. However, the reality is that at $6-8 billion in debt per day, and an overall share of $132,000 per taxpayer, there aren’t enough Warren Buffets to tax in order to solve the problem. In fact, if we confiscated all of the income from the top 1% of taxpayers, we would only net $938 billion dollars … and proceed to lose all future revenues in subsequent years. Even as our debt explodes to record levels, Americans’ collective net worth has fallen $5.5 trillion since 2007. So during the same time that our debt has increased over 65%, our net worth has dropped by 8.6%. The golden goose is dead.
Unfortunately, too many Republicans desire to merely trim around the edges, while sustaining the fundamentals of the prodigal government functions. Many of the presidential candidates have touted their ideas of trimming “waste, fraud, and abuse.” While those ideas are laudable and imperative, they are also woefully insufficient. We will never salvage our children’s future unless we eliminate full departments, institute market reforms for retirement and healthcare, and shut down much of the welfare state. We need more bold solutions form our presidential candidates – aside from those who have no problem with Iran developing a nuclear bomb.
Otherwise, our next Republican president will risk being the $20 trillion man.