Thursday, October 06, 2011


Since April 2011 Americans witnessed a political theater over the U.S. debt ceiling. The Standard and Poor’s review of that performance resulted in a downgrade of the federal government’s credit rating.

While Congress raised the debt ceiling for now, the U.S. debt remains a problem and the short-term solution offered by the deal in Congress does little to give us a long-lasting solution.

The creation of a “super” deficit committee by Congress merely kicked the can down the road. Congress, and its long years of indecision regarding what to do about deficits and the national debt, is the problem!

The U.S. is currently experiencing historically high levels of debt. The best way policy experts have of measuring debt burden is comparing the national debt to total Gross Domestic Production (GDP). Today, the total net debt is 75% of GDP. This type of high debt is normal during periods of war like that of WWI and WWII. We are at war in Afghanistan and Iraq; however, that is nowhere near the wartime mobilization of WWI and WWII.

The U.S. debt is an accumulation of many years of deficits, which has been brought about by exceeding revenues during past fiscal year. These deficits did not cause our current situation alone. The U.S. has run an annual deficit in almost every year since 1945. But we have never encountered debt levels as perilous as the one we have now.

Our debt is due to structural causes brought about by poor political choices. These poorly designed public policies directly contributed to the housing bubble, loose oversight of Fannie Mae and Freddie Mac, lack of regulations on sub-prime lending and low-interest rates for far to long.

Public policies in response to the 2008 meltdown led to even higher debt with its fiscal stimulus and monetary policy. We should not fault the federal government’s response to the crisis in 2008; there were very few alternatives available once we got into that mess.

So you see, our large debt burden problem is structural and will not be reversed when the economy picks up. The hole the Congress has dug for our country is far to deep and getting deeper at an accelerating rate. We are coming to a tipping point. If we reach that point, several negative consequences could result.

1. The national debt will crowd out private investment.
2. Spending will have to be cut and taxes raised to pay off just the increasing interest on the U.S. debt.
3. The debt load will severely restrict the government’s ability to act in times of an emergency.

There is time to start reversing the trend; we are not doomed to the fate of countries such as Greece and Ireland. Yet, it will take a bipartisan approach and shared sacrifice to correct our present course and here in lays the problem. We have seen how our Congress and Senate work together, or should I say do not work together. If the U.S. continues down the same road it has been on for the last 12 years, we are going to get the same results: recessions, higher U.S. debt and continued high unemployment.

The definition of insanity is continuing to do the same thing you have always done an expecting a different results.

You can be part of the solution. We are about to go through the thing that has always made this country GREAT! A National election! You need to meet with our candidates and listen closely to them. You also need to be heard by them. You need to be heard saying that you will not stand for politics as usual. You know in your heart of hearts that to actually fix the problems of the U.S. debt, unemployment and our country; we will have to raise taxes and cut spending. Don’t stand for a politician that is promising “No new taxes” or “We can cut spending” alone. They are simply saying what you want to hear to get elected. Stand up for what you personally feel it is going to take to fix our country!