Metro Phoenix Real Estate Blog -- Eric Crane, DPR Realty LLC -- (602) 327-8475

U.S. Federal Debt Passes the 15 Trillion Dollar Mark -- Will the Madness Ever End

For those keeping score, the U.S. Federal Debt has just climbed above 15 trillion dollars.

During the Obama Administration, it has increased from $10.626 trillion to $15.033 trillion (and counting).  That's an increase of more than 41% just since President Obama took office.

This is not intended as a slam on the Obama administration, alone.  The federal debt also skyrocketed during the administration of George W. Bush, and our government has been on a spending binge for several decades.

Uncle Sam with Empty Treasury

Artwork by James Montgomery Flagg, 1920

Currently, there is a so-called Super Committee of Congressional Republicans and Democrats that are trying to find ways to reduce our growing budget deficit.  They are only about 1 week away from an important deadline.  They must either agree to find $1.2 trillion in budget savings, or run the risk of automatic cuts (that would impact items like Defense spending).  Washington observers are not expressing a great deal of optimism that the Super Committee will reach an agreement in time.

The Federal deficit for the just-completed budget year was $1.3 trillion -- which means that the government is borrowing 36 cents for every dollars it spends.  Under current policies, the annual debt would likely increase by a trillion dollars or more per year, through the end of the decade. 

Here is the reality:  the bulk of the money we spend goes toward the several largest items on the budget:  Social Security, Defense, Unemployment and Welfare Programs, Medicare, Medicaid, and Interest on the National Debt.  Add these items together and they account for nearly 75% of all Federal Spending.

You could ELIMINATE every other program, project and department that the government spends money on and you'd still be borrowing money just to cover these first six items!  Read that again and let it sink in.

By the way, interest on the national debt accounts for approximately 4.6% of the budget right now.  That is because we have interest rates at or near historic lows.  What happens when the interest rate climbs?  The amount of money that we will need to dedicate toward interest will also climb.  The higher the rate, the more it will take to service the debt -- and that doesn't take into account the fact that the total amount of debt is still climbing.

We could get to a point where we are borrowing money just to pay interest on the national debt.  How long do you think our creditors would allow us to continue that?

To avoid bankruptcy, our government must undertake severe spending cuts and they must do it now.  If I had to pick two items for cuts that would have the largest impact, I would suggest Defense Spending and Medicare/Medicaid. 

Clearly, we live in a dangerous world and must maintain a strong defense.  Part of this will require us to retain strategic 'landing sites' throughout the world.  Yet we have hundreds of bases, worldwide.  Is there an opportunity to save some dollars?

With regard, to Medicare/Medicaid -- if we do not get our arms around the escalating costs of healthcare, that alone could bankrupt us.  We need to attack the healthcare problem from all angles, including reforms in medical malpractice, insurance costs, preventative medicine, etc.

If we make inroads in these two areas, and couple it with eventual reforms in Social Security and our Tax System, we will be well on our way to getting back on solid ground.  If we fail to take decisive action, we run the risk of destroying our dollar, and bringing on a global economic collapse.

The time is now.

U.S. Federal Debt Passes the 15 Trillion Dollar Mark -- Will the Madness Ever End

Photo used via a Creative Commons license on Flickr.com (through the courtesy of Infrogmation), November 16, 2011.