The other day, I ran across a simple, but very troubling graph depicting the percentage of national debt to gross domestic product (GDP) as a function of time (in years).
The ratio has gone up and down in the 50-odd years since the 1960s, but the slope of the curve during the last three years has been unprecedented. During the Obama presidency, the percentage of national debt to gross domestic product (GDP) has increased from 70 to 100 percent, about 10 percent per year. As I have mentioned in other posts, if Barack Obama is re-elected and continues his profligate spending (there is absolutely no indication that he will not), and if he and other Democrats continue to demagogue any attempt to control spending and reduce the growth in entitlements, the national debt to GDP percentage will be about 140% toward the end of his second term. Greece’s current debt to GDP ratio is about 120%.
The United States has had uncontrolled spending under almost every president, but the situation under the current president is frightening. He seems either unwilling or unable to understand the (now) short-term ramifications of his actions.
When our lenders (e.g., China) demand higher rates of return, federal interest payments to service the debt will skyrocket. Increasingly larger percentages of federal revenue (taxes) will be allocated to service the debt. With less money available to run the government, draconian budget cuts will impact the very people that President Obama purports to care about—the poor, the elderly, the infirm. As the government prints money in a futile attempt to remedy the situation, inflation will increase.
The president loves to deride “trickle-down” economics. He seems incapable of understanding that as bond rates rise, higher interest rates trickle down to all borrowers, suppressing consumer purchases like cars, houses, and appliances. The economy tanks.
But no worries, the President has a plan—“tax the rich” so that they pay their “fair share” and just keep spending, “stimulating,” and using federal tax dollars to bail out select demographic segments who have behaved irresponsibly but now demand government assistance to remedy their indebtedness. No matter that confiscating all of the wealth of “the rich” would do little to change the slope of the debt curve—it sounds oh-so-sweet to the President’s economically-challenged supporters.
Take a hard look at the curve. It’s a dire warning that no responsible citizen can ignore.