United Liberty

It’s nice to see the media finally pick up on this, especially as the Obama Administration  runs record deficits “for years to come”:

[A]s the U.S. spends trillions to stabilize the recession-wracked economy, helping to force down the value of the dollar, the securities become less attractive as investments. Some major foreign lenders are already paring back on their purchases of U.S. bonds and other securities.

And if major holders of U.S. debt were to flee, it would send shock waves through the global economy - and sharply force up U.S. interest rates.

As time goes by, demographics suggest things will get worse before they get better, even after the recession ends, as more baby boomers retire and begin collecting Social Security and Medicare benefits.

[…]

Some budget-restraint activists claim even the debt understates the nation’s true liabilities.

The Peter G. Peterson Foundation, established by a former commerce secretary and investment banker, argues that the $11.4 trillion debt figures does not take into account roughly $45 trillion in unlisted liabilities and unfunded retirement and health care commitments.

That would put the nation’s full obligations at $56 trillion, or roughly $184,000 per American, according to this calculation.

The national debt, as a result President Barack Obama’s budget, is expected to increase by $9.3 trillion over the next 10 years (p.11). Debt as a percentage of gross domestic product, or GDP, is expected to exceed 100% in the next 20 years.

For those of you not familiar GDP, it is the market value of all goods and services produced by the United States in any given year. In 20 years will have accumlated a debt equal to our entire economic output for an entire year. The only time that has previously happened in our country was during World War II.

Unfortunately, the long-term picture is even worse, according to the Government Accountability Office (GAO):

Congress, and this is on both parties though there are exceptions, has largely ignored the problem and is showing no signs of changing course. Every interventionist action by the Obama Administration or Congress leads to another interventionist action, putting prosperity at risk and the future of our economy in question.

It doesn’t stop with debt either. More debt means more spending to service that debt, that means more spending and further crowding out of our economy which means higher inflation.