U.S. Nears the Precipice

From Online.wsj.com

Economists have long fretted about how an aging population and growing health-care costs will cause the U.S. budget deficit and public debt to balloon -- an outcome that could wreak financial havoc by undermining confidence in the U.S. dollar.

Obama signs U.S. debt limit increase into law

From Reuters.com

President Barack Obama on Monday signed into law an increase in the U.S. national debt limit to $12.4 trillion, the White House said in a statement.

Coming Soon: The Bill for the Massive U.S. Debt

From Moneymorning.com

The Spiraling National Debt

Right now, without counting future unfunded liabilities like Social Security or Medicare, our national debt tops $12 trillion. There are roughly 100 million American households. That's a national debt of roughly $120,000 per family.

In order to keep the government functioning, Congress just increased the federal debt ceiling to $12.5 trillion. And the party isn't over yet.

In an effort to keep mortgage interest rates low, the Fed pledged this month to buy yet another $500 billion of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) guaranteed mortgage securities.

But all that spending has a price. And the bill is about to come due.

The White House estimates that the government will have to borrow about $3.5 trillion more over the next three years. On top of that, the U.S. Treasury has to refinance, or roll over, a huge amount of short-term debt that was issued during the financial crisis. Treasury officials estimate that about 36% of the government's marketable debt - about $1.6 trillion will mature in the next 12 months.

A debtor nation

From Americanthinker.com

In all the years of the nation's existence up to the end of 2007, the total national debt held by the public amounted to 36.2% of the Gross Domestic Product (53.8% by the end of 2009). By the end of 2012, based on the proposed budget of the Obama administration, that percentage will be 71.6. Thus, in five years, the debt will nearly double. If the trend is not stopped, then by 2019, the debt will triple to over 100% of GDP.

These projections do not include the overwhelming future impact of the health care reform bill recently passed in Congress, which will cost over $2.5 trillion in its first ten years of implementation. Nor does it include the carbon cap-and-trade or any other pending spending and regulatory bills. Beyond the expenditures contemplated, these actions will stifle domestic economic growth, so necessary for government revenue, and leave the now-global economy in the hands of our potential adversaries.

To put this into perspective, by 2019, three items -- interest on the debt, Social Security, and Medicare-Medicaid -- will account for 92% of all revenue to the federal government. Everything else will have to be funded by borrowing.

If Social Security Gets No Increase, Why Do Federal Workers?

From Theledger.com

Regarding the Dec. 14 front-page article "1.1 Trillion Plan - Senate Sends Spending Bill to Obama," page A1 and A6 - Spending - Column 3, Paragraph 3, "The bill also approves a 2 percent pay increase for federal workers." The government stipulated that people on Social Security, Social Security Income and Social Security Disability will not be getting a raise next year in their checks because there has been no increase in inflation this year.

If this is true, then where did they find money to give their federal employees a 2 percent raise and why? Why should they get raises, but elderly and sickly cannot?

They're not having to choose between paying bills, electricity, eating or buy medications. They probably make three times what the elderly do.

These people on Social Security have paid into it all their lives, so when the time came for retirement, they thought they would be OK.

We're in a recession. There is no money for increases in Social Security, but there is always money for raises for government employees.

decade from hell

From Myhighplains.com

On the heels of recent action by the U.S. House, the Senate has approved a two-month increase in the federal debt limit. The temporary boost allows the government to cover financing needs over the next two months.

How much you want to bet it will be made permanent?

Our government is digging it deeper and deeper

From Dissidentvoice.org

Interest rates are very low today, by historical standards, but they will not always be low. When interest rates rise, the interest cost on the same amount of debt will be higher. If current interest rates were to double, over a period of time, the $451 billion interest cost would double to $902 billion. The United States government has dug itself into a very deep hole over the past 28 years. We are in so deep that we can barely see the dim light at the top of the hole. Unfortunately, instead of filling the hole in, our government is digging it deeper and deeper!

From Boston.com

“For the next decade or two, on some reasonable sets of assumptions, our borrowing cushion shrinks significantly, threatening to test our capacity to raise funds to finance unprecedented deficits,’’ Greenspan said in testimony to the Senate Homeland Security and Government Affairs Committee.

Greenspan warned that the rising public debt leaves the government’s fiscal position vulnerable to a rise in interest rates.

In answer to a question about why rising debt is a concern, Greenspan said: “The critical issue that economists worry about’’ is the spiral that occurs with ever-rising debt and debt service, often followed by higher interest rate. As a consequence of that, “the debt service becomes explosive and that moves directly into the budget deficit,’’ he added.

Selling Fear

Obama: U.S. 'will go bankrupt' without health care bill

From Usatoday.com

"If we don't pass it, here's the guarantee," Obama said. "Your premiums will go up, your employers are going to load up more costs on you ... Potentially they're going to drop your coverage, because they just can't afford an increase of 25 percent, 30 percent in terms of the costs of providing health care to employees each and every year."

He added that the costs of Medicare and Medicaid are on an "unsustainable" trajectory and no is action taken to bring them down, "the federal government will go bankrupt."

"If we don't do this, nobody argues with the fact that health care costs are going to consume the entire federal budget," Obama told Gibson, the ABC anchor who is retiring this week.