The U.S. National Debt as seen in February 2009

By: Ian Campbell | Tue, Aug 14, 2012
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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:

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:

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:

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.

 


 

Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Economic Straight Talk

Through the Economic Straight Talk Newsletter Ian R. Campbell shares his perspective on the world economy, the financial markets, and natural resources. A recognized business valuation authority, he founded Toronto based Campbell Valuation Partners (1976), Stock Research Portal (2007) a source of resource companies market data and analytic tools, and Economic Straight Talk (2012). The CICBV* annually funds business valuation research in his name**. Contact him at icampbell@srddi.com.
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