By Peter Roff, Thomas Jefferson Street blog
It is a measure of the nation’s economic illiteracy that the most recent debt projections have not received more coverage. Sure, most people can tell Karl Marx from Harpo but it is highly unlikely that they can distinguish between Adam Smith and Will, even if he were to bite them on a visible hand.
As reported Friday by Bloomberg, the total United States debt under President Barack Obama is poised to explode past its statistical post-war norms to a point where it “exceeds the value of the nation’s annual economic output.” Total federal government debt rose past $13 trillion for the first time in June 2010 and is on track to surpass U.S. Gross Domestic Product by the year 2012, according to projections just issued by the International Monetary Fund.
Part of the problem is that the U.S. economy is not growing. The stimulus spending that President Obama and the Democrats who control Congress said would solve the problem and bring about an early end to the recession has not worked as advertized, leaving unemployment figures at their highest point in decades and doing little to spark productive economic activity.
Right now, according to a variety of estimates, the U.S. economy, if it grows, will do so at something less than its statistical average in the latter half of the 20th century, which puts it at below 3.2 percent.
There are those who will undoubtedly point to the large deficits run up on a yearly basis under Presidents Ronald Reagan and George W. Bush as proof that what is happening under Obama is just business as usual. And they would be wrong.
Under Reagan and under Bush the U.S. economy grew, and strongly, making the annual new debt to GDP ratio something that could be absorbed as increased revenues filled federal coffers. Under Obama, the new spending along with the projected tax increases that will occur when he allows the Bush tax cuts to expire will lead to a decline in future federal revenues, making the new total debt--nearly half of which has been amassed under the current president alone--something that may handicap the U.S. economy for at least a generation.