Saturday, February 20, 2010

U.S. Debt and Deficit

Ever wonder how bad the U.S. deficit and debt are? I came across the U.S. National Debt Clock a couple weeks ago. To me, the U.S. deficit and debt are pretty bad. Here's some information from the debt clock as of 2/20/2010:

  • Over $12 trillion gross national debt and growing
  • Over $40,000 debt per citizen and growing
  • Budget deficit of about $1.4 trillion for 2010
  • In the short term, it doesn't look like the U.S. deficit and debt situation is going to get better. To me, the long term won't be any better unless we make some significant reductions in what government spends. Otherwise, the U.S. may find itself in a financial situation equal to or worse than Greece.

    Simply, we need to make the difficult choices now or suffer worse consequences later. I believe it's time we elect officials who are committed to reducing the national debt and improving the economy at the same time.

    That would be change I can believe in:-)

    For more on Reflections and Musings, check back every Saturday for a new segment.

    This is not financial or economic policy advice. Please consult a professional advisor.

    Copyright © 2010 Achievement Catalyst, LLC


    Edwin said...

    You are completely ignoring the proper way to actually look at these figures. Sure the number seems very large but using nothing else is just dishonest.

    Due to the growth of the economy, the numbers will always be bigger. To get a good view you must look at the debt compared to the GDP. You can find a graph of that here:

    All of this fear mongering is pointless if you happen to look at the real numbers.

    Super Saver said...

    @ Edwin

    After looking debt compared to GDP, I still think the current US deficit and debt are an issue. The ratio is rising, after being stable or declining for many years.

    I assume from your comment that you don't think the increasing debt nor the increasing ratio of debt to GDP is an issue. I'd be interested in your reasoning.

    Edwin said...

    Yes rising debt is a bad thing. That doesn't necessarily make it an issue at this very moment. Debt should be increasing in the face of a recession like the one we had. In times of boom the government pays down debts while in times of recession the government goes into debt, that's how an economy works.

    I also just realized that graph I initially linked is rather poor as it stops at 2000 (whoops!). Here is an up to date one.

    I don't like this one specifically because it includes presidents, making it political but we just have to get past that part.

    Clinton presided over a boom, so the debt was paid down. Obama stumbled into a very horrible recession so he will have a debt.

    This does not mean I think ALL debt is good because it definitely is not. For example (political now) spending money on wars and on tax cuts that don't increase revenues is a very good way to increase our deficit. And unlike fighting recessions, these have no upside whatsoever.

    The only time I'm not concerned is the case where the debt is a response to a recession.

    I find the use of flat figures very misleading. The constant fear mongering I hear everywhere, like you said "we need to make the difficult choices now or suffer worse consequences later" is not based in fact. There is no crazy consequence if we deal with the debt now. The true consequence is if we worry about deficits and keep our economy in the tank for a decade (like Japan).

    Super Saver said...

    @ Edwin,

    Interesting points. I had a few questions to help me better understand your comments.

    You said, "Yes rising debt is a bad thing. That doesn't necessarily make it an issue at this very moment." So when does it become an issue?

    You acknowledge increasing debt (wars and tax cuts were your examples) that does not help the fight the recession is not good. (In my opinion, there are other areas of increased spending that also are not helping fight the recession.) Yet, you do not agree that it makes sense to make "tough choices" to eliminate these causes of rising debt. Is there any spending that you think should be reduced?

    Finally, you say that there are "no crazy consequences if we deal with the debt now," yet, you call making tough choices to deal with the debt "fear mongering" and "not based on fact." I'd be interested in hearing about the easy choices to "deal with debt now":-)