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The National Debt

July 30, 2009 - 11:40am
Richard Sutton by Richard Sutton


The U.S. National Debt, while already onerous, now expands at record rates.

This is an equal opportunity offense - The last several presidential/congressional administrations have spent roughly ten percent more than they had in revenues and now it's going to be around +15%!  So essentially the government does what leaves everyone else that does it in ruin - Support a lifestyle on credit.

Overall, the public debt level would double over the next decade to $15.4 trillion ($12.5 trillion in inflation-adjusted dollars).  At 67 percent of U.S. GDP, this would constitute America's largest debt burden since immediately following World War II

In the long run, Washington is dumping a colossal amount of debt into the laps of our children and grandchildren. Between 2008 and 2013, the budget will add $5.7 trillion ($48,000 per U.S. household) in NEW government debt. The annual interest on this debt would nearly equal the entire U.S. defense budget by 2019. Moreover, given the unsustainable costs of paying Social Security, Medicare, and Medicaid benefits to 77 million retiring baby boomers, the federal debt will continue expanding after 2019.

In 2007, before the recession, Washington spent $24,172 per household. By 2019, the projected budget would spend $32,463 per household.  We can't afford the amount of government we have now and the consequences are only worse for every day that we ignore our government's outrageous deficit spending and monumental national debt.

Between 1953 and 1982—a period of high tax rates, spending growth, and applied Keynesian economics—the economy was in recession 21 percent of the time, inflation reached 13 percent, interest rates hit 19 percent, and the stock market grew only 5.4 percent annually.

Conversely, beginning around 1982, tax rates were dramatically reduced, and federal spending began decreasing as a share of the economy. In the 26 years following this major policy shift, the economy has been in recession only 10 percent of the time (including the current recession), inflation has never topped 5 percent, interest rates have never exceeded 12 percent, and the stock market (despite increased volatility) has soared 7.0 percent annually, even including the recent 50 percent drop.

The moral of this story is that you can neither spend, nor tax, your way to prosperity.  A balanced budget with minimal or no debt is good for American families and good for American government.

Related Content:

Economics of Pie - Richard Sutton
Health Care Reform Vs. Regulatory Reform - Richard Sutton
How Inflation Happens and Why It's Bad - Nick Coons

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