Whenever we sound the alarm bells over our impending fiscal disaster, liberals scoff at our concerns. They assert that our comparison to European countries is exaggerated and irrelevant to the fiscal situation here at home. After all, we have a much larger economy and can sustain all that debt.
The reality is that we are already close to the fiscal cliff that many European countries have encountered, and in just a few years, we will surpass them in terms of the severity of our debt crisis. Take a look at this chart from the Heritage Foundation:
At present, the share of our public debt, which stands at $11.122 trillion, is about 72.7% of our GDP ($15.3 trillion). As you can see, that is already worse than some of the countries that are suffering from severe fiscal crises. It’s roughly on par with the debt-GDP ratio of the U.K. and it is well beyond that of Spain. In just 17 years, we will reach the current debt-GDP ratio of Greece!
But the numbers are worse than what the Heritage chart depicts. The national debt consists of two components; debt held by the public and intra-government debt. The debt held by the public is the sum of the treasury securities held by those outside the federal government, with the lion’s share owned by foreign countries. The debt held by the public currently stands at $11.112 trillion. The other component, the intra-governmental share, is owed to other federal agencies and accounts, most prominently, the non-existent Social Security Trust Fund, as well as accounts holding pensions for military veterans and government workers. That share of the debt currently stands at $4.78 trillion.
For many years, liberal economists have implored us to ignore the gross national debt, which includes the intra-governmental share, because that is money we ‘owe ourselves.’ This chart only factors in the public share, which is “only” 73% of GDP. However, this in itself is a dubious measure because we will still need to issue more (public) debt, print more money, or raise taxes to pay for SS and federal pensions – unless we cut benefits. So most of the “intragovernmental “share of the debt will eventually be converted into public debt.
Accordingly, if you factor the gross federal debt, which is currently just shy of $16 trillion, the debt-GDP ratio is actually 104%. Using a quick back of the envelope calculation, if Obama were to win reelection and continue the current trajectory of debt accumulation, we would reach 130% by the end of his term.
Folks, we literally cannot afford one more term of this ship wreck without righting the ship immediately.
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