ACT: Association for Contract Textiles

Cited: MSNBC

The debt level of the U.S. reached a dubious distinction; it is now as large as the entire economy. Gross domestic product in the U.S. is approximately $15 trillion, and now total debt has reached the same, $15.23 trillion. And it looks like the worst is far from over. The Obama Administration is projecting our debt level to reach $23 trillion by 2020, which is larger than the projected $22.5 trillion GDP. Experts agree that rising debt ratio is not good, but few of them can seem to agree on just how bad it is. There is some agreement among economists about how to fix the problem, but among lawmakers the word agreement seems to have fallen out of their lexicon. And consider it is the lawmakers that need to enact policies to fix the problem, having them at odds over the best approach is getting things nowhere fast.

Economists point out that the $15 trillion doesn’t have to be paid back all at once and some say that the figure is a little misleading because it included money owed by one government agency to another. A better figure to assess debt levels in the U.S. is net debt, which measures the amount the U.S owes investors. This figure is approximately 70% of GDP.

Another bright spot in this otherwise dark cloud is that the interest on U.S. debt is currently not a huge burden, but that won’t be the case should interest rates rise from their current levels near historic lows. Another reason for lawmakers to get their act together and come up with policy solutions to address the debt issue.

If the U.S. economy begins to gather some momentum, tax revenues will increase and government expenditures for fall for social services such as food stamps and unemployment insurance. On the other hand, the growing cost of entitlement programs such as Medicare are not as easily addressed and do not go away when the economy gets moving in the right direction. Experts agree that only policies that target the cost of health care, which is rising at a higher rate than inflation, will help to trim governments expenses.

Others note that Washington can improve the fiscal stimulus plan that helps with investment, job creation, and consumption. Infrastructure projects like road improvements give the private sector and job creation a huge boost. But the current stalemate in Congress when it comes to approving spending projects makes it unlikely that these programs will be enacted anytime soon.

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My Take:

It seems like nothing will get policy makers in Washington to make the hard decisions necessary to grow the economy and fix our fiscal mess. While most sensible people agree that wise investment and cutting and reforming wasteful spending is the best approach, the politicians are more worried about getting re-elected and pandering to the extremists on both sides of the spectrum.

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