The U.S. National Debt as seen in February 2009
Why read: To test the contemporaneous views I expressed four years ago, to observe similarities and differences then and now, and to determine if you agree with my current views.
Commentary then: On February 24, 2009 I commented as follows:
I am sure all readers remember Humpty Dumpty who sat on the wall, had a great fall and smashed, with the result that 'all the King's horses and all the King's men, couldn't put Humpty together again'.
An article titled 'Obama pledges to slash deficit -- after increase' says President Obama pledged Monday "to dramatically slash the skyrocketing annual budget deficit as he started to dole out the record $787 billion economic stimulus package he signed last week". The article:
quotes Obama as saying "If we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road," promising to cut the yearly deficit in half (to about $650 billion per year) by 2012 from the 2009 legacy deficit left to him by the Bush Administration of $1.3 trillion; and,
goes on to enumerate a number of the things both economic and 'social problematic' Obama (thought at the time were) important.
It is hard to estimate the current cumulative U.S. National Debt inclusive of the various stimulus packages - but I think it likely is between $11 and $12 trillion.
If there are no further stimulus packages, and Obama succeeds in reducing the U.S. 2012 deficit to $650 billion, by my reckoning the cumulative U.S. National Debt will stand at over $15 trillion at the end of 2012. I derived that number by assuming a level decrease in the annual deficit from $1.3 trillion in 2009 to $650 billion in 2012, and added the resulting assumed deficits for the 2009 - 2012 period to $11.5 trillion, being the mid-point of my current assumed cumulative U.S. National Debt.
I continue to wonder where all the money is going to come from to achieve Obama's deficit reductions:
- when the U.S. tax base is dropping every day as a result of job losses and company cut-backs'; or,
- for that matter where it would come from if the U.S. tax base was not eroding at all.
No matter how many of his men President Obama puts to the task, I am increasingly thinking it likely the U.S. has fallen from 'the wall' and 'all of Obama's men will not be able to put it together again'.
Commentary now: As things have turned out, I have been proven to be conservative in my forecast of cumulative U.S. National Debt. As I write this that figure is just under U.S.$16 trillion and counting. The United States:
- has not as yet exceeded the 'debt ceiling' approved July 31, 2011 of $16.7 trillion that when passed was expected to enable borrowing into 2013;
- the first tranche of the agreed debt ceiling increase raised the debt ceiling to $15.2 trillion upon agreement;
- that amount was reached in January, 2012, and a second tranche then raised the debt ceiling further to $16.4 trillion in January 2012;
- in the past seven months the U.S. National Debt has increased by about $100 billion per month;
- at the current rate of increase the agreed 'debt ceiling' of $16.7 trillion will be 'drawing nigh' by the end of 2012;
- $16.7 trillion exceeds U.S. 2011 GDP about 10%; and,
- no doubt this will result in further 'debt ceiling' 'heated debates' and negotiations between the Democrats and Republicans early in 2013.
President Obama was dead right when he said in February 2009 "if we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road'. In August 2012, three and one-half years later, there is no foreseeable reward - at least I don't see one - in him being right on this point.
Simply put, the United States Government (Democrats and Republicans) has failed to confront the deficits effectively, and the quicksand in 2012 is deeper now, and has greater 'sucking strength', than was the case in February 2009.