Government & Constitution

Fifteen Trillion And Counting

The United States government officially passed the $15 trillion debt milestone on Tuesday.  The Republican National Committee produced a little video to commemorate the occasion, and remind us of the bygone days when Barack Obama stridently declared $9 trillion in debt was too much, and he’d cut the deficit in half by the end of his first term:

Many people have become concerned about the staggering amount of American debt purchased by China.  Those people can relax, because China is no longer the largest holder of U.S. government debt.  Who is?  Why… none other than the U.S. Federal Reserve.  That’s right.  The largest share of Uncle Sam’s debt is held by Uncle Sam.  We borrow the money from ourselves, so Barack Obama can buy votes with over a trillion dollars a year more than the government actually takes in.

CNS News explains how it works:

In its latest monthly report, the Federal Reserve said that as of Sept. 28, it owned $1.665 trillion in U.S. Treasury securities. That was more than double the $812 billion in U.S. Treasury securities the Fed said it owned as of Sept. 29, 2010.

Meanwhile, as of the end of this September, entities in mainland China owned $1.1483 trillion in U.S. Treasury securities, according to data published today by the U.S. Treasury Department. That was down slightly from the $1.1519 trillion in U.S. Treasury securities the Chinese owned as of the end of September 2010, according to the same Treasury Department report.

Thus, at the end of September 2010, the Chinese owned about $339.9 billion more in U.S. Treasury securities than the Fed owned at that time. By the end of September 2011, the Fed owned about $516.7 billion more in U.S. Treasury securities than the Chinese owned.

Okay, so we’ve got the federal ouroboros chewing on its own tail, with a swollen belly full of madly churning printing presses, ready to explode in a shower of devalued dollars.  But at least Obama’s madcap spending spree helped stimulate the economy, right?

Nope.  Not only did we get nothing for the trillions in debt Obama has piled on, his “stimulus” ideas were worse than useless.  It will have a net negative effect on GDP over the next ten years.  Republican Senator Jeff Sessions of Alabama wondered how that was possible in a budget hearing on Tuesday, and Congressional Budget Office Director Douglas Elmendorf laid out the dismal situation:

Bonus: things will get even worse in the next decade, as the enormous cost of financing Obama’s debt keeps rolling along. 

We could pay off the national debt today… provided every single man, woman, and child on Earth sent $2,000 to the U.S. Treasury.  Of course, a lot of them don’t have $2,000.  That’s more than the per-capita income of 70 countries.  Maybe we could ask everyone in the developed world to work one month out of the year to get good old Uncle Sam out of debt?  Unfortunately, only 29 countries have a per-capita income above $2,000 per month.  That includes Greece and Italy.  They’re kind of busy with their own debt issues right now. 

Greece and Italy, by the way, have a combined national debt of about $3.1 trillion, one-fifth of ours, and their economies are on life support.  Of course, we’re a larger country with a much larger economy, so we can handle the debt load, can’t we?  Look at it this way: the per-capita debt of Greece is about $56,000 per person, while in Italy it’s $45,000 a head… and we’re right in the middle, with just a hair under $49,000 in debt piled on every single American’s shoulders.  We’re on schedule to hit Greek levels of per-capita debt within two years. 

No level of taxation can ever erase that burden.  Outright confiscation kills the goose that lays the golden eggs.  High tax rates crush GDP growth even faster than high deficit spending.  And if our GDP finally perks up, and brings us some decent job creation, interest rates will probably go up too… raising the cost of financing the debt.  We’ll stumble out of the Obama woods and walk right into the debt-service bear trap he’s set for us. 

The deficit-reducing Super Committee is locked in a death struggle over the right mixture of tax increases and spending cuts to reduce the deficit by $1.2 trillion over 10 years.  That’s not the same thing as reducing the debt – it will continue to grow.  They’re just arguing about reducing the rate of increase by 10% or so, at best.  $1.2 trillion over 10 years is $120 billion per year.  The United States of America borrows $120 billion roughly every three weeks. 

The cost of financing all that debt will eat an increasing portion of the federal budget.  Debt service gobbles up over 6% right now.  That means either tax increases, or even higher deficits, will be necessary merely to maintain current spending levels – and that’s before the automatic “baseline” increases built into every government program are factored in.  Today’s staunch opposition to tax hikes means ever-greater debt, which siphons away even more federal money into debt service, and builds the pressure for tomorrow’s even more massive tax increases. 

If you think the “evil Rich” are being demonized now, just wait until debt service has eaten away another 5% of the budget – something that will happen within the next 10 years, and probably the next five, even if America’s credit rating doesn’t take another serious hit.  It will happen even if Obama doesn’t get the next $450 billion “stimulus” he’s been demanding.  Our government is quite large enough to die of a fiscal coronary even if it stops eating donuts.

The spending death spiral has long passed the point where it’s self-perpetuating.  Citizens of Greece coping with austerity programs feel as if they have no good choices – they can’t afford reduced pensions or higher taxes, but their government will die if it doesn’t get its debt under control.  The last “good choices” for Greece were a generation ago.  The next generation of Americans will feel exactly the same way, if we don’t wise up and do something about it, right now. 

Fifteen trillion in debt and counting.  You won’t like what happens when we hit twenty.  We’ll probably get there by the end of Barack Obama’s second term.

Sign Up