The latest government closure may be nothing compared to what will happen if the US debt ceiling is not increased when our debt limit is reached on October 17th.
The debt ceiling actually does nothing to reduce deficits, as all US government expenditures are determined by legislation that has been passed separately, independent of the ceiling itself. The US has acquired these obligations over the years which include payments for social security, Medicare benefits, interest on the debt, and military benefits, among other essential expenses. FAILING TO INCREASE THE DEBT CEILING COULD HAVE CATASTROPHIC CONSEQUENCES TO EACH AND EVERY ONE OF US. The fact that one political party is playing hard ball with the full faith and credit of the United States is reckless at best.
Let’s put a few numbers in context by comparing some key economic data from 2008 and now 5 years later in 2013. In 2008, Americans lost over 2.6 million jobs alone, and unemployment was 10%. Private sector employment was at about 110 million jobs and government sector jobs were about 22.5 million as we turned the corner from 2008 to 2009. America was hemorrhaging fast, and immediate actions needed to be taken. At the end of 2009, the budget deficit as a percentage of Gross Domestic Product (GDP) was over 10%. GDP is defined by Investopedia as the monetary value of all the finished goods and services produced within a country’s borders annually. The national debt was around 10.6 trillion when President Obama took office.
Where are we now in 2013? There has been slow and steady job growth from 2009-2013. It certainly is not where we need to be, but jobs are being created despite the extreme bullying in Washington. We have had close to 5 years straight of private sector job growth, from a low of about 107 million jobs in 2010 to over 113 million in 2013. In addition, the federal government is shrinking, as jobs have DECREASED from a high of around 23 million government jobs to 21.8 million jobs in 2013 and falling. MOST of us should get behind these numbers and understand that government is shrinking and the private sector is growing. Also, unemployment is hovering around 7.3 % now in late 2013.
The most important factor is the deficit as a percentage of GDP. When President Obama took office, the debt was about 10.6 trillion and represented a little over 10% of our GDP. Now the debt is approaching 16.7 trillion, yet it represents only 5.7 of our country’s GDP as of March 31, 2013 (Bloomberg) due to increased tax collections on and the slowing of the rate of growth in spending. The Congressional Budget Office data shows that the % of GDP should slow to 4% for this fiscal year and down to 3.4% next year. The historical average over the last 30 years is 3.3%. This level of debt, while increasing, is completely sustainable based on historical data.
I understand totally that the debt of America needs to be addressed. We do need to change the age folks can collect social security as 62 is WAY too young to be able to collect a full benefit. I realize that programs like Medicare have to be reformed, as does the tax code. These should be addressed independent of the debt ceiling. ALL of our futures are at stake here.
Listen below on FM 106.1 WNBP in Newburyport as I discuss this topic with morning guy Win Damon.
10 October 2013