Our National Debt: A Clear and Present Danger

The time is now and the moment is at hand. We must deal with the run-away spending of our federal government before our compounding debt drives us all into forced servitude for generations to come. There is little doubt that our growing indebtedness is a clear and present danger to our liberty.

The events in Tunisia and Egypt are warnings to us in the United States that prolonged unemployment, few opportunities for achievement and over taxation to support the excesses of government are the precursors to chaos. We are seeing that for an educated people who have played by the rules and have the burning desire to prosper, such conditions are exactly what Thomas Jefferson described to the Virginian historian Samuel Kercheval in his July 12, 1816 letter, “We must not let our rulers load us with perpetual debt.”

Jefferson went on to describe the choice that the people must make between “Economy and liberty or profusion and servitude.” He continued with,

“If we run into such debts, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our callings and our creeds, as the people of England are, our people, like them, must come to labor sixteen hours in the twenty–four, give the earnings of fifteen of these to the government for their debts and daily expenses; and the sixteenth being insufficient to afford us bread, we must live, as they now do, on oatmeal and potatoes; have no time to think, no means of calling the miss-managers to account; but be glad to obtain subsistence.”

Jefferson’s conclusion read with the backdrop of recent events in Northern Africa should shock us all into reality, “Then begins, indeed the bellum omnium in omina.” His Latin phrase means “the war of all against all.” Our nation is on the brink and I will explain.

Our National Debt has increased 40% since the November 2008 Election, from $10 trillion to $14.1 trillion. This is not a left versus right, or Democrat versus Republican issue. This is the one example of true bi-partisanship in our federal government. The numbers alone, while enormous, do not accurate describe the danger we are facing. By comparing the Debt to the nation’s Gross Domestic Product (GDP), the sum of all goods and services produced by our nation, we can better see the edge of the cliff that we are rapidly heading for.

GDP for 2010 was just reported to be $14.9 trillion, with an annualized growth rate of 3.2%. The Congressional Budget Office (CBO) reported that the projected deficit for the fiscal year 2011 will be $1.5 trillion, which means that our Debt is growing at a rate higher than 10% per year. From 1994 through 2008, our Debt remained between 56% and 69% of our GDP. It rose to 85% of GDP in 2009 and to 94% in 2010.

The math is easy. Our Debt is growing 10% per year while our GDP is growing 3.2% per year. At these rates, by the end of 2011, our Debt will equal $15.6 trillion while our GDP will equal $15.4 trillion. Our Debt will be more than 100% of our GDP.

Interest on our Debt is the fourth highest expense for our nation, behind defense, Social Security and Medicare. The average rate on U.S. Treasury securities (the average rate we pay on our Debt) stands today at 2.365%. We paid $414 billion in interest on our Debt in 2010. The average rate on our Treasury securities is projected to be 2.9% in 2011 and our interest expense in 2011 will most likely be over $430 billon.

Relating interest expense to government revenue is a wake-up call. In 2010, Income Tax revenue was $1.1 trillion, therefore more than $0.40 of every income tax dollar collected paid for nothing other than interest. The additional revenue of $874 billion collected as payroll taxes was spent dollar for dollar on Social Security and Medicare benefits. It is projected that in 2011, Income Tax revenue will rise to $1.4 trillion and payroll tax revenue will increase to $933 billion. However, Social Security is projected to run a $45 billion deficit in 2011 and therefore again, 40% of revenue net of entitlement benefits will be paid out for nothing more than interest.

Making matters worse is that in 2010, 32% of our Debt was held by foreign governments. This means that the American people paid $134 billion ($30 billion to China) to these governments. Foreign government ownership of our Debt will increase to 38% in 2011, which means that the American people will transfer $163 billion (approximately $40 billion to China) to these governments.

We no longer have the luxury of playing politics with the labor of future generations. If we don’t deal with all government spending, including entitlements, and talk in terms of trimming at least $1 trillion from the deficit so that we can reduce the rate of growth on our Debt to the same as the rate of growth on our GDP, we will accomplish nothing. The hopes of a better life with real opportunities for an educated population will be trashed by our government’s refusal to live within it means. Thomas Jefferson’s words are growing louder and louder.