President Barack Obama is poised to increase the U.S. debt to a level that exceeds the value of the nation’s annual economic output, a step toward what Bill Gross called a “debt super cycle.”
The CHART OF THE DAY tracks U.S. gross domestic product and the government’s total debt, which rose past $13 trillion for the first time this month. The amount owed will surpass GDP in 2012, based on forecasts by the International Monetary Fund. The lower panel shows U.S. annual GDP growth as tracked by the IMF, which projects the world’s largest economy to expand at a slower pace than the 3.2 percent average during the past five decades.
our debt is poised to surpass GDP in the near future
“Over the long term, interest rates on government debt will likely have to rise to attract investors,” said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest publicly traded bank. “That will be a big burden on the government and the people.”
Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co. in Newport Beach, California, said in his June outlook report that “the debt super cycle trend” suggests U.S. economic growth won’t be enough to support the borrowings “if real interest rates were ever to go up instead of down.”
Read More: By Garfield Reynolds and Wes Goodman, Bloomberg
Tags: Barack Obama, Debt, GDP, out of control spendingSocial Security, Medicare and the retirement of the baby boom generation wasn’t enough of a burden for the American taxpayer. We will now be paying as well for the generous pensions of Greek bureaucrats retiring in the warm Mediterranean sun at age 55, thanks to the foresighted leadership of our very own international statesman, Barack Obama.
Just last year President Obama proposed, and his overwhelmingly Democrat Congress approved, an additional $100 billion line of credit from the USA to the International Monetary Fund (IMF). On Sunday, the IMF approved a contribution of $40 billion to the Greek bailout, with America voting yes for yet another raid on its own taxpayers.
But this is only the beginning. What the trillion dollar Euro bailout fund has done is to create the perverse incentives of Too Big to Fail for fiscally irresponsible Eurostates. Do those literally murderous Greek rioters look ready to accede to austerity budgets with massive tax increases and massive benefit cuts? Political leaders in the Mediterranean states in particular, faced with short-term financial and political pressures, will be too tempted to put off the pain a little longer, hoping that EU bailouts will save them in the end. Indeed, voters in Spain, Italy, Portugal, and elsewhere may well think they should get their share of those bailout funds too, voting out leaders who try to be responsible, and voting in the worst demagogues trying to take advantage of the situation to gain political power.
Imagine if each of the American states could run deficits with a federal bailout fund to back them up. Could we count on the voters of California, New York, New Jersey, Michigan, and Illinois to support candidates promising crippling austerity budgets, with draconian benefit cuts and skyrocketing taxes, so they can do the responsible thing? This is the system the EU has just adopted. What that means is get ready for still more IMF bailouts financed by American taxpayers.
Read More: By Peter Ferrara, American Spectator
Tags: Bailouts, Barack Obama, broke, Debt, GreeceWhat with the bailouts, the stimulus, and now the government healthcare takeover, we’re being told that we face $1 trillion annual deficits for the indefinite future, with a $12 trillion to $20 trillion debt by 2020. In February, Congress raised the federal debt limit to $14.3 trillion. That’s bad.
But it’s only the beginning. Does anyone seriously think the current spending binge is all we can expect from this Porky Pig Congress? Programs are sprouting like crabgrass. The horrifying numbers we are now hearing about future deficits reflect projections of existing program spending. They do not count the inevitable spending that will flow from all the yet-to-be unleashed goodies that Congress and Obama have in their hip pockets.
Federal programs grow like Paul Bunyan and live far beyond their usefulness. There is simply no incentive to cut programs or staff, which would signal loss of power and prestige. Government managers face no profit motive or expectant stockholders. Businesses and households cut back if they overspend. The government just comes up with more ways to tax us, and in increasingly sneaky fashion. Have you looked at your phone bill lately? Who stuck all those esoteric charges there, with such names as "federal connection fee" or "Fred the bureaucrat’s lakefront retirement home fund?"
But let’s get back to the big stuff. The "doc fix" to restore physicians’ fees in Medicare that are artificially low and have been restored annually since 1997 will cost $200 billion over the next 10 years. This was not in the healthcare bill (what do doctors have to do with healthcare?) so Congress could pretend the massive bill will actually cut the deficit.
Read More: By Robert Knight, OneNewsNow
Tags: Bailouts, Barack Obama, Debt, StimulusPresident Obama’s fiscal 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years, $1.2 trillion more than the administration projected, and raise the federal debt to 90 percent of the nation’s economic output by 2020, the Congressional Budget Office reported Thursday.
In its 2011 budget, which the White House Office of Management and Budget (OMB) released Feb. 1, the administration projected a 10-year deficit total of $8.53 trillion. After looking it over, CBO said in its final analysis, released Thursday, that the president’s budget would generate a combined $9.75 trillion in deficits over the next decade.
"An additional $1.2 trillion in debt dumped on [GDP] to our children makes a huge difference," said Brian Riedl, a budget analyst at the conservative Heritage Foundation. "That represents an additional debt of $10,000 per household above and beyond the federal debt they are already carrying."
The federal public debt, which was $6.3 trillion ($56,000 per household) when Mr. Obama entered office amid an economic crisis, totals $8.2 trillion ($72,000 per household) today, and it’s headed toward $20.3 trillion (more than $170,000 per household) in 2020, according to CBO’s deficit estimates.
That figure would equal 90 percent of the estimated gross domestic product in 2020, up from 40 percent at the end of fiscal 2008. By comparison, America’s debt-to-GDP ratio peaked at 109 percent at the end of World War II, while the ratio for economically troubled Greece hit 115 percent last year.
Read More: By David M. Dickson, Washignton Times
Tags: Barack Obama, CBO, DebtThe Congressional Budget Office has released its assessment of President Obama’s budget, and the results aren’t pretty. According the analysis, deficits in the next decade will be worse than what the White House has projected, much higher than they would be if we were to follow current law, and even higher than what CBO had forecast last year.
Between 2011 and 2020, the nation will accumulate $9.8 trillion in deficits as a under the Obama budget, according to the CBO, ending the decade with $20.3 trillion in public debt, which translates into a staggering 90 percent of gross domestic product (compared with the 53 percent Obama “inherited” in 2009). By contrast, in its own budget release, the White House Office of Management and Budget had projected debt at 18.6 trillion in 2020 (or about $1.7 trillion less than the CBO).
Obama’s budget would also add more to the debt when it is viewed relative to the CBO baseline scenario that assumes current law is followed, as demonstrated by the area chart below. The blue area represents the additional debt created by Obama’s budget — while it may not look huge, the difference reaches about $5 trillion relative to the CBO baseline scenario (or added debt of 23 percent of GDP) by 2020.
Read More: By Philip Klein, American Spectator
Tags: Barack Obama, Debt, out of control spendingPresident Obama sent Congress a $3.8 trillion budget Monday for fiscal year 2011, pushing a plan that includes new jobs-creation programs but is projected to add nearly $1.3 trillion in deficit spending on top of the current year’s projected $1.6 trillion deficit.
Obama is proposing a massive federal budget
According to the plan, the 2011 deficit of $1.267 trillion would fund nearly the entirety of the year’s discretionary spending, which is $1.415 trillion or 37 percent of the government’s total outlays.
Mandatory spending on items such as entitlements and interest payments make up the rest.
The Senate moved last week to extend the nation’s debt limit to $14.3 trillion to accommodate the projected gap for the current spending year, which ends Sept. 30, but with another $1.3 trillion hole next year, the nation’s debt could reach $15.6 trillion by Oct. 1, 2011. That would surpass the nation’s annual gross domestic product.
A $1.6 trillion deficit would represent 10.6 percent of current GDP, while 2011’s budget deficit would be 8. 3 percent of GDP. The White House says over the next 10 years, the average deficit will represent only 4.5 percent of GDP annually. Last year’s deficit was $1.42 trillion.
Read More: FOX News
Tags: $3.8 Trillion Deficit, Barack Obama, Debt
The latest calculation of the National Debt as posted by the Treasury Department has – at least numerically – exceeded the statutory Debt Limit approved by Congress last February as part of the Recovery Act stimulus bill.
The ceiling was set at $12.104 trillion dollars. The latest posting by Treasury shows the National Debt at nearly $12.135 trillion.
A senior Treasury official told CBS News that the department has some "extraordinary accounting tools" it can use to give the government breathing room in the range of $150-billion when the Debt exceeds the Debt Ceiling.
Were it not for those "tools," the U.S. Government would not have the statutory authority to borrow any more money. It might block issuance of Social Security checks and require a shutdown of some parts of the federal government.
Pending in Congress is a measure to increase the Debt Limit by $290 billion, which amounts to six more weeks of routine borrowing for the federal government. (The House just passed the increase, though the Senate has yet to act. It is expected to approve the measure.)
Read More: by Mark Knoller, CBS
Tags: Barack Obama, Crossing the debt ceiling, Debt, Debt Clock, Out of control debt
Obama’s Promises of Fiscal Responsibility Ring Hollow
Two recent news stories illustrate, more clearly than ever, the Obama Democrats’ contempt for the free market and individual economic liberty. If given the chance, they will expand government and spend as much of our money as they can get away with.
First we learn that Obama and his party simply will not agree to keep their grubby government hands off the estimated $200 billion the banks are going to repay under TARP. Just when we finally receive this glimmer of good news to ameliorate our reasonable panic over the ever-increasing national debt, Obama announces that he intends to intercept a good portion of the debt repayments and spend it on job creation and assistance to certain debtors.
I assume we’re supposed to be too dense to remember that his stimulus spending to date hasn’t created jobs and that most of it hasn’t even been used for that purpose. So when this administration says its first priority is reducing debt, understand we are being played – by consummate cynics.
Likewise, the Democrats’ various health-care plans contemplate $500 billion in Medicare savings between 2010 and 2019. But instead of using the savings to shore up this entitlement’s solvency, they are charging forward with a new entitlement: major subsidies to the uninsured to buy health insurance.
Read More: By David Limbaugh, WND
Tags: "fiscal Responsibility", Barack Obama, Debt, Dream On, Empty Promises
Digging us deeper and deeper into debt
In a bold but risky year-end strategy, Democrats are preparing to raise the federal debt ceiling by as much as $1.8 trillion before New Year’s rather than have to face the issue again prior to the 2010 elections.
“We’ve incurred this debt. We have to pay our bills,” House Majority Leader Steny Hoyer told POLITICO Wednesday. And the Maryland Democrat confirmed that the anticipated increase could be as high as $1.8 trillion — nearly twice what had been assumed in last spring’s budget resolution for the 2010 fiscal year.
The leadership is betting that it’s better for the party to take its lumps now rather than risk further votes over the coming year. But the enormity of the number could create its own dynamic, much as another debt ceiling fight in 1985 gave rise to the Gramm-Rudman deficit reduction act mandating across-the-board spending cuts nearly 25 years ago.
Already in the Senate, there is growing pressure in both parties for the creation of a novel bipartisan task force empowered to force expedited votes in the next Congress on deficit reduction steps now shunned by lawmakers.
Read More: By DAVID ROGERS, Politico
Tags: Barack Obama, Debt, Digging us deeper, running out of moneyGuess what? It turns out the Chinese are kind of curious about how President Barack Obama’s healthcare reform plans would impact America’s huge fiscal deficit. Government officials are using his Asian trip as an opportunity to ask the White House questions. Detailed questions.
The Chinese are concerned Obamacare will Sink America deeper into debt
Boilerplate assurances that America won’t default on its debt or inflate the shortfall away are apparently not cutting it. Nor should they, when one owns nearly $2 trillion in assets denominated in the currency of a country about to double its national debt over the next decade.
Nothing happening in Washington today should give Beijing any comfort or confidence about what may happen tomorrow. Healthcare reform was originally promoted as a way to “bend the curve” on escalating entitlement costs, the major part of which is financing Medicare and Medicaid. That is looking more and more like an overpromised deliverable.
Read More: By James Pethokoukis, Reuters
Tags: Barack Obama, Chinese Creditors, Debt, Deficits, out of control spending
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