The total US debt has just jumped over the $18 trillion mark for the first time ever. With all of the other major problems we are facing as a country, this one might be the crow bar that finally shatters the camel’s back:
It also means that total US debt to nominal GDP as of Sept 30, which was $17.555 trillion, is now 103%. Keep in mind this GDP number was artificially increased by about half a trillion dollars a year ago thanks to the “benefit” of R&D and intangibles. Without said definitional change, debt/GDP would now be about 106%.
It also means that total US debt has increased by 70% under Obama, from $10.625 trillion on January 21, 2009 to $18.005 trillion most recently.
It is hard to say just how significant total US debt actually is. For years, the US has been functioning under the largely Keynesian assumption that economic growth relies on government spending, and government spending requires debt. But the facts tell of a much different reality:
Economists James Gwartney, Randall Holcombe and Robert Lawson reported: “Evidence illustrates that there is a persistent robust negative relationship between the level (and expansion of) government expenditures and the growth of GDP. Our findings indicate that a 10% increase in government expenditures as a percent of GDP results in approximately a 1 percentage point reduction in GDP growth.” Similarly, Harvard economist Robert J. Barro found that “growth and the size of government are negatively related when the government is already very large.”
If the federal government refuses to recognize this, the ratio of debt to GDP will only increase. If GDP continues to shrink as government spending demands ever higher taxes and “revenue,” the time will come sooner than later when we can’t even pay the interest on our loans. If that happens, what can we do? Default?
That possibility should terrify the decent people of this country. We are driving headlong toward an irremedial financial meltdown—one that neither the Fed nor the feds can do anything to fix. If there is still time, and there may not be, we need to immediately begin to fix this problem. Decrease civil government spending, and spend the surplus on paying down the total US debt. We’re almost to the point where such a solution would be impossible.