National debt seen heading for crisis level - from The SF Chronicle

National debt seen heading for crisis level - from The SF Chronicle

National debt seen heading for crisis level
Carolyn Lochhead, Chronicle Washington Bureau
Monday, April 5, 2010
(04-05) 04:00 PDT Washington -- Health care may have been the last big bang of the Obama presidency.
With ferocious speed, the financial crisis, recession and efforts to combat the recession have swung the U.S. debt from worrisome to ruinous, promising to handcuff the administration.
Lost amid last month's passage of the new health care law, the Congressional Budget Office issued a report showing that within this decade, President Obama's own budget sends the U.S. government to a potential tipping point where the debt reaches 90 percent of gross domestic product.
Economists Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard University have recently shown that a 90 percent debt-to-GDP ratio usually touches off a crisis.
This year, the debt will reach 63 percent of GDP, a ratio that has ignited crises in smaller wealthy nations. Fiscal crises gripped Canada, Denmark, Sweden, Finland and Ireland when their debts were below where the United States is shortly headed.
Japan's debt is much higher, but most of it is held domestically, and Japan's economy has been weak for 20 years. "I really don't think we want to be like Japan," said UC Berkeley economist Alan Auerbach.
One advantage the United States has - and it is a big one - is that it issues the world's reserve currency and so can print dollars to service its debt.
The Obama budget will add $10 trillion to the national debt in the next decade and will not stabilize the deficit, the CBO found. Deficits are expected to dip as the recovery takes hold, but never below $724 billion a year. Interest costs alone will consume $5.6 trillion this decade. A balanced budget has been widely ruled out as unattainable.
"The real problem is not just current deficits but where we're heading," Auerbach said. "We're on a trajectory where the deficit's going to go down a little and then go up again. And we have no solution for that."
Deficits won't reverse
No one is advocating big tax increases or spending cuts before a recovery takes hold. The problem is that deficits will not reverse even after a full recovery.
Credit rating agency Moody's warned last month of a possible downgrade in U.S. Treasury debt. This year, Social Security is crossing a long-feared milestone at which it is paying more in benefits than it receives in payroll taxes. Study after study in the last year has raised alarms.
"In my judgment, a crisis could occur next week or 10 years from now," said Rudolph Penner, an Urban Institute economist who co-chaired a huge budget report sponsored by the National Academy of Sciences and the National Academy of Public Administration. "I don't really think we can go much beyond 10 years."
Polls show rising public alarm - and public refusal of specific spending cuts or tax increases required to change course. A Field Poll last month showed most Californians do not want to cut the largest parts of the state budget, such as education or transportation.
The polling firm Democracy Corps recently warned Democrats that the deficit now tops unemployment as a voter concern. But it also found voters "unenthusiastic" about the options to close the deficit. Voters overwhelmingly prefer spending cuts to tax hikes but reject cutting specific programs.
Republicans promise to make deficits a premier political issue. But during the health care debate, they opposed any cuts to Medicare, the chief source of rising deficits. They also oppose tax increases and defense cuts. In January, they sabotaged rare bipartisan legislation to create a powerful deficit-reduction commission that would have forced action.
Stabilizing the debt without raising taxes, cutting Medicare or defense, or defaulting on the debt would eviscerate everything else, from the Border Patrol to highways. Earmarks constitute a pittance.
The numbers don't add up for Democrats either. For all their railing against the Bush tax cuts that contributed to the current dilemma, Obama intends to extend almost all of them. That will cost $2.5 trillion, said the Committee for a Responsible Federal Budget. Obama also escalated the war in Afghanistan.
And he joined Republicans in sabotaging the deficit commission by creating a substitute commission by executive order that seems designed to fail. It cannot compel action, and its recommendations are postponed until after the November election.
Consensus difficult
Obama and party leaders stacked it with partisans, from Rep. Jeb Hensarling, R-Texas, to Andrew Stern, head of the Service Employees International Union, making it difficult to get the 14 out of 18 votes required to agree on anything.
The executive order is a study in artfulness. It calls for a deficit target in 2015 that will be largely reached through the recovery and opens a wide escape hatch by saying decisions are contingent on the economy.
Democrats are already picking off low-hanging, deficit-reduction fruit to increase spending instead. Led by Rep. George Miller, D-Martinez, Democrats approved $61 billion in savings last week by cutting banks out of student lending - and used it to expand aid to students and colleges.
Democrats often give the impression that taxes on the rich can fix everything. But the center-left Tax Policy Center ran simulations showing that Obama's budget would have to raise $775 billion in new taxes every year to stabilize deficits at 2 percent of GDP. That means that if Obama keeps his promise not to raise taxes on the middle class, the rich would pay 90 percent of their income in taxes, the center said.
Obama "promised to be honest with the public, and he has a talent for doing so," said Maya MacGuineas, president of the moderate Committee for a Responsible Federal Budget. "Yet he hasn't used it yet to describe what types of hard choices will be involved."
Soaring levels of debt
$10 trillion Amount the
Obama budget will add to the national debt in the next decade.
$5.6 trillion Amount interest costs alone will consume this decade.
63% Debt-to-gross domestic product
ratio this year.
90% Debt-to-gross domestic product ratio anticipated within this decade.
E-mail Carolyn Lochhead at clochhead@sfchronicle.com.
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/04/05/MNI21COVR1.DTL
This article appeared on page A - 1 of the San Francisco Chronicle

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10 Comments

5 years 4 weeks ago, 12:22 PM

ecaman

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And where is the coverage from the national commercial media on this? Nowhere. They're busily covering the sensationalistic, momentary things that get them cheap ratings numbers. I hear this addressed on PBS and NPR, but very rarely anywhere else.
And will it be addressed in Congress? Hah! It will be, and already is, politicized by demagogues appealing to the lowest common demoninator of their core constituencies. And because of gerrymandering of the congressional districts, agreed to in each state in backroom deals, these demagogues will continue to be reelected. Some will call me a pessimist, but I believe that I'm a realist.
Maybe we can elect some people who actually want to address realistic solutions. At least we can, and should try.

If you pick up a starving dog and make him prosperous, he will not bite you. This is the principal difference between a dog and a man. (Mark Twain).
5 years 4 weeks ago, 4:59 PM

CharlesW

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In short Congress has exempted themselves from the
new health care bill.

The 28th amendment says
Congress shall make No LAW that applies to the
people and not the Congress

Nor shall Congress make a law that applies to the
Congress and not the people.

Just wondering if this had been discussed.
I know there are petitions going around about this
lets say over sight of Congress.

When do we put a cap on the Congress salary?
A one term Congressman draws his or her salary for life

A little rebellion is good medicine for the government Thomas Jefferson
5 years 4 weeks ago, 2:23 PM

OozeRat

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demagogues? constituencies? gerrymandering ? Please remember I'm a product of our public educational system. Takes me a lot of time to look up all these big words and now I have a headache so I better go lay down.

Nothing is as risky as certain failure.
5 years 4 weeks ago, 3:32 PM

greg az

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Its not going to be the old farts like ecaman and I that have to deal with this... Fact is our national debt is "unfunded" for the very first time in history.. This means were just printing money.. You've heard about other nations (manly China) buying our national debt.. It's gotten so bad, and so huge they wont buy anymore, not that anyone wants them to.. It was wrong when we started selling our debt, but at least it was "backed" IE the dollar was sound..

Whats happening now is really a major deal, but because its confusing to a lot of people, and the media does not cover it its off the radar screen to most Americans.. Please trust me on this one, on a 1 to 10 scale of whats important to the future of this country 40 years from now. this is a 12.. Because you can hide figures behind smoke and mirror the debt goes up every couple of weeks.. Fact is Oberry spent more money in his first 9 months than Bush did in 8 years, and Bush was an outrageous spender..

If we did not have kids, and g-kids i think id just say were all getting what we deserve, but when i think of what so many have gone thru to elevate our nation to this point it just disgusts me to see that its going to be ruined because the public would rather watch showbiz tonight than learn about what the national debt means down the road..

a man has to hold his word, hold his beliefs, and hold a good sight picture.
5 years 4 weeks ago, 5:32 PM

CharlesW

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Best wishes with the Doc.

A little rebellion is good medicine for the government Thomas Jefferson
5 years 4 weeks ago, 4:20 PM

samD

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$100,000,000.00 +/- per day, yes bunky that is 100 million in interest only with NOTHING going to principle. I say Fuck the Chinese, stop payments, stop importing their Crap merchandise and see what they do. The Democrats are so scared that the Chinese might attack us. What can they possibly do to us? Sure a war would be hell and 45 years ago on active duty, the consensus was that the next great war would be China V. USA. China could lose 1/2 their population and be so much better off.
Let's roll the dice and start the dance...

5 years 4 weeks ago, 4:30 PM

samD

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Muy importante, senor!

5 years 4 weeks ago, 4:44 PM

ecaman

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OozeRat

If you looked up the words you mentioned, and now understand them, then I've accomplished something.
Unfortunately, I generally agree with you about our public education system. All 4 of my grandchildren are now in the public schools, from kindergarten to a senior in high school. My older daughter was graduated in the honors program from high school, and was graduated summa cum laude from BYU (English). My younger daughter has 3 years of college. NONE of them know as much world or US history as I did in the 8th grade. NONE of them know anything about mathematics beyond simple arithmetic. NONE of them can correctly identify all 50 states on a map, nor find even the major world countries on a world map. My younger daughter is the only one who has any idea about how government works. I knew this in the 8th grade. All of them, except the kindergartner, are absolutely excellent at using a cell phone or I-phone or blackberry, or playing computer games. When our grandkids visit, they continually ask me to explain things to them. They're all intelligent, but are being given nothing useful in school. Our public school system is turning out yet another generation of only superficially educated people, prating the mantra, "It's not MY fault!".

If you pick up a starving dog and make him prosperous, he will not bite you. This is the principal difference between a dog and a man. (Mark Twain).
5 years 4 weeks ago, 4:54 PM

luckybychoice

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Here's a tidbit

on China,thanks to hurricane katrina and such, a lot(i'm still looking into the amounts) of chinese sheetrock was imported into the USA,mostly into the southern states.But the chinese sheetrock emits a gas that is corroding the wiring and plumbing inside the wall cavity and also going into the home interior air and affecting the resperitory systems of residents,some more than others.

The cure for this is to gut the hose,sheetrock,wiring,plumbing,HVAC,and insulation.So far i haven't gotten the total number of houses affected but it's in the thousands.US companies that make sheetrock do not have this issue,it appears the chinese are adding this chemical as a method of getting rid of it(the chemical) don't mean to not have all the info but i thought it was important to let you all know that you need to make sure where your sheetrock is coming from,hopefully not China. here's link to one article http://www.cnn.com/2009/US/03/18/chinese.drywall/index.html

i tried being reasonable,i didn't like it, NRA LIFE MEMBER,USMC VETERAN
5 years 3 weeks ago, 10:59 PM

OozeRat

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Some private schools are even worse than the public ones. One of my cousins and all his younger siblings were all enrolled at the same private school. When he was finishing up 8th grade his parents were told his reading/writing/math/history/etc were all at or above 12 grade level. In 9th grade his parents let him attend public school because thats where all his friends went, he failed nearly every class and after a teacher had him take a test his edcation was compared to the average 6th grader in public schools. Needless to say his parents pulled all their kids out of that private school.

Nothing is as risky as certain failure.
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