Cynical Synapse

Tue, 20 Oct 2009

US Barrelling Toward National Debt Bubble

Filed under: Bailout, Budget, Congress, Economy, Government, Politics — Tags: , , — cynicalsynapse @ 6:24 am

While looking into the Stimulus’ economic benefit, or rather lack there of, I realized how rapidly the national debt was growing. It’s not rocket science to figure declining revenues, from spiralling job losses, cannot sustain continually rising debt. This is like the Wall Street crisis but on a much grander scale. Don’t be fooled into thinking the US is too big to fail. There’s no such thing.

Since the Stimulus failed to jumpstart the private sector, jobs in the US continue to disappear. Even construction, a heavily touted aspect of Stimulus, has lost an average of 66,000 jobs a month in 2009. And the bulk of Stimulus money has been distributed. Like the Wall Street bailout, Stimulus has not had any trickle-down effect to the masses. In a word, Stimulus has been a failure.

Many states are using Stimulus money to staunch bleeding state budgets. This is like using duct tape to fix a broken bridge. It might look ok but the problem is still there. The budget problems are structural, meaning states are spending more than they’re taking in. Failing to address these issues now will hit them like an iceberg hitting the Titanic in two years when all the Stimulus money is gone.

How do state budgets tie into the national debt? Simple. Federal programs like Medicaid and highways have state, and sometimes local, matches. When states can’t afford to offer basic services or respond to emergencies or disasters, the Feds will have to pick up the cost on some things. Those added costs can only be tacked onto the rocketing deficit. Coupled with the reckless spending of the Stimulus and Wall Street bailout, as well as annual deficit spending exceeding $1 trillion projected for the next 10 years, we’re seeing explosive growth in the national debt.

To put it in perspective, consider these facts. When President Obama was sworn in on January 20, 2009, the national debt totaled $10.6 trillion, a figure that was already unacceptably high. But by the end of Obama’s first term, the national debt is projected to be approximately $17 trillion. By the end of his second term, the national debt is projected to soar to approximately $24 trillion. And these are using the administration’s own projections, which many experts believe are overly optimistic.

Perhaps even more significant, we are rapidly reaching a point where added debt will have no positive impact on gross domestic product (GDP). At that point, the national debt bubble will burst and our economy will implode. The government’s running the biggest Ponzi scheme ever! People talked about the Stimulus providing green shoots to reverse the economic downturn. I think the only green we’re going to see from the ruinous fiscal policy is this.


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