National Debt Crisis, Part 1

As a nation, the United States is quickly spinning toward debt Armageddon. Our national debt is currently somewhere north of $14 trillion - that's 14,000,000,000,000 dollars. Even more portending of fiscal doom is the percentage of U.S. Gross Domestic Product (GDP) this represents. As of 2010, our debt stands at about 92% of GDP, if all foreign and domestic debt is included. To put this in terms that are easier to grasp, imagine a household with an annual income of $100,000 that has accumulated a credit card bill of $92,000. Such a situation would require immediate and significant change to avoid financial collapse.

How do we, as a nation, address this crisis? Somehow, we need to get federal spending to match, and eventually fall below, revenues coming in to the federal treasury. But projected budgets for the next 5 years show annual deficits that will increase our debt to over $20 trillion, which will most likely increase debt to GDP to over 105%. In other words, far from beginning to balance our budget and pay off our debt, we are significantly increasing it. And this at a time when spending on Social Security and Medicare will be skyrocketing as the disproportionately large Baby Boomer generation begins to retire.

Clearly, we are heading into a financial abyss that is currently swallowing some Western European nations, such as Greece and Portugal. One only needs to turn on the news to see the recent violent repercussions of such a debt-induced crisis in Greece. So how do we avoid the inevitable coming crisis that our current fiscal policies have wrought? I will be addressing this from 2 perspectives in upcoming entries: from the revenue side, and from the spending side.

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