U.S. Debt Overshadows Pending Economic Recovery
No matter how well the United States performs in its economic recovery and how many people are put back to work, the looming federal debt threatens to undermine the government’s success.
The new budget recently submitted by President Obama assumes that everything done lately to help resurrect the stumbling economy actually will work. His budget proposes the spending for fiscal 2011 be a record total $3.8 trillion. Still $1.3 trillion would have to be borrowed because taxes collected would only cover $2.5 trillion.
“In the end, solving our fiscal challenge—so many years in the making—will take both parties coming together, putting politics aside, and making some hard choices about what we need to spend and what we don’t,” Obama said during his weekly radio and internet address on Saturday.
When you consider there already is a national debt exceeding more than $12.3 trillion, more certainly needs to be done. After all, the government is close to the $14.3 trillion cap on national debt that was set during a recent increase.
With so many promises of bailouts and new mandatory programs, the government will need some help to prevent a larger financial disaster stemming from increasing deficits. As much as no one wants to talk about it, there will need to be changes in spending and taxation.
Already there are decades-old commitments on top of the new promises. For example, Social Security and Medicare continue to operate. When you add the interest payments for the programs on top of the current national debt, 80 percent of all revenue for the government through 2020 is spoken for, some government economists forecast.
What happens with the rest of the funding for the government? Consider the military and homeland security need must be met despite which political party is in charge. That’s just a small sample of the obligations.
Borrowing money to keep the government operating isn’t anything new. The United States already is the biggest borrower on earth, but for how long? Moody’s Investors Service already has said the government’s financial picture needs to improve if its credit rating is to remain at the current level.
This is a lot for Congress to consider. After the Senate comes back from its Presidents Day recess, its members plan to debate a bill backed by the administration that is intended to spark job creation. Companies that hire the unemployed would get a tax credit that would increase an additional $1,000 per worker if the employee remains on the payroll for at least year. The expected price tag? Tax credits totaling $13 billion.
Yes, the time is approaching when the United States needs to pay the piper. Whether that will occur under the best of circumstances remains to be seen. But with the national debt expected to equal double the current value of the gross domestic product during the next few years, the International Monetary Fund and economists around the globe are concerned about the United States.