Behind the Curtain – Total US National Debt

Projected US National Debt Based Upon Current Rates Of Spending

Projected US National Debt Based Upon Current Rates Of Spending

This graph tells a very scary story, and complements my last blog, “Global Warming vs the National Debt”, which compares the hoax of Man Made Global Warming with the stark reality of America’s National Debt. The data was derived from the White House’s own data (OMB supporting tables) from the “2013 Long Range Budget Outlook“.

The first critical element of this chart, which shows constant year 2013 dollars, provides a look at TOTAL US Debt, not oneobscured by debt to GDP ratios. As bad as the gap between the two lines looks, it is most likely optimistic. OMB data assumes a constant 3% interest rate on America’s debt, basically forever. The more that America borrows, however, the greater the risk that our credit rating will get downgraded again, and force those rates up. Just a small increase would be devastating. America also faces the real risk that it becomes a bad credit risk. Nobody knows when that will happen, but every year that we stay on this clearly unsustainable path, increases the odds that America hits the borrowing cliff.

The chart’s second critical element is the decreasing number of years needed to add $10 Trillion blocks to the debt. Each $10 Trillion takes considerably less time to accumulate and is proof of how dire America’s fiscal situation is. Spread the word, pass this chart around, elect fiscal conservatives to Congress, and hound your representatives to balance the budget. Time is running out!

 

Frightening CBO Forecasts from THE BUDGET AND ECONOMIC OUTLOOK: 2014 TO 2024

The following quotes were taken from the CBO’s own report, found here. They tell the very frightening story that if our country doesn’t change the fiscal path that it’s on under the Democrat’s tax and spend policies, our country is headed for a disaster. We need to stand up, get vocal, vote out the spenders and force our elected officials to balance the federal budget, before the mounting trillions that we owe dooms us!

  • “Beyond 2017, CBO expects that economic growth will diminish to a pace that is well below the average seen over the past several decades.”
  • “Such large and growing federal debt could have serious negative consequences, including eventually increasing the risk of a fiscal crisis (in which investors would demand high interest rates to buy the government’s debt).”
  • “Interest rates on Treasury securities, which have been exceptionally low since the recession, are projected to increase in the next few years as the economy strengthens”
  • “Deficits Are Projected to Decline Through 2015 but Rise Thereafter, Further Boosting Federal Debt”
  • “In addition, changes in people’s economic incentives caused by federal tax and spending policies set in current law are expected to keep hours worked and potential output during the next 10 years lower than they would be otherwise.”
  • “Over the next decade, debt held by the public will be significantly greater relative to GDP than at any time since just after World War II. With debt so large, federal spending on interest payments will increase substantially”

In the below chart, also from the OMB report, note that the discretionary items in the budget get squashed by mandatory spending of interest, social security, and major health programs.

OMB Figure 1-2

OMB Figure 1-2

 

What Our Government Won’t Show Regarding The Debt

The Congressional Budget Office released a report in September 2-13 (updated in Oct) called the 2013 Long Term Budget Outlook. http://www.cbo.gov/publication/44521

Both Republicans and Democrats heavily quoted the report. Republicans were quick to reference that the report concluded that America can’t sustain the debt path we are currently on. Democrats used a very slight near term improvement to the annual Debt to GDP ratio as great evidence that President Obama and the Democrats in Congress were improving the economy and the US debt picture. As often occurs, the Democrats are stretching the truth to the breaking point. The comparison of spending to GDP, used everywhere in the report, is camouflage for what’s really happening. See a couple of the report’s GDP comparisons by clicking here. Nowhere does the report show the debt in actual dollars. The two charts below expose the truth, extrapolating from the report’s supporting data tables, and proves that fundamentally the US is on a disastrous spending path.

Chart 1 below throws the Debt to GDP ratio away and provides raw constant year 2013 dollars for both Total US National Debt and GDP. Democrats trumpet the minuscule dip of the debt (Red Curve) below the GDP (Green Curve) in the 2018 time-frame as great news. Despite the fact that it was caused by the Republican House, it’s so insignificant that you can barely see it. Unless we control the reckless federal spending tidal wave, the red curve (US real debt) will grow exponentially vs our GDP. US debt will pass $30 Trillion by 2030. At some point in the not so distant future, we’ll cross the point of no return, a cataclysmic debt “event horizon”. The responsible answer involves cutting federal spending.

Government Debt Projections Exposed

Government Debt Projections Exposed

Chart 2 shows two potential futures from CBO’s report. A $2T reduction across ten years reduces the debt growth to the green curve. A further reduction to $4T across ten years dramatically (purple curve) cuts the debt’s growth more, but it does not yet cut the debt. Additional reductions (beyond $400B/yr), along with pro-growth economic policies are critical to balancing, and perhaps dare I say, paying it off.

Only Immediate and Deep Cuts Stabilize Budget Future

Only Immediate and Deep Cuts Stabilize Budget Future

For comparison purposes, the Debt to GDP ratio was added to Chart 2 (dotted blue line). Notice that the Democrat’s touted reduction in Debt to GDP clearly happens at the same time that the Debt itself explodes.

BOTTOM LINE: Significant cuts are essential and need to happen yesterday.

NOTE: Comparisons to GDP are useful to assess one time in history to another. However, our goliath government created a new paradigm that makes the debt to GDP ratio a poor future comparison and pundit “feel good” conclusions based upon them grossly misleading. Why?

Past spending spikes were more “single year” events as opposed to spending baked into the Federal baseline as they are today:

  1. Huge spikes in past Annual Debt to GDP were largely due to military wartime spending, easily reduced after wars ended to return to sustainable spending. See below chart.
  2. Today’s spending, which drives each year’s budget deficit, is increasingly caused by sources that can’t be easily eliminated (unlike the case with wartime spending).
    1. Interest on the national debt. The interest avalanche grows each year, as shown here, and must be paid or the US Government defaults on its obligations. Even Progressives admit that’s a bad thing.
    2. Social welfare programs are the third rail of politics. Democrats use them to buy votes, and bludgeon anybody who suggests responsibly reforming them.

Interest and social welfare programs, which now include Obama Care’s massive costs, will consume the budget, pushing all else aside. That “all else” includes what our Constitution mandates the Federal Government actually do.

From CBO's "The 2013 Long-Term Budget Outlook"

From CBO’s “The 2013 Long-Term Budget Outlook”