A new and ugly superlative will soon circulate through Washington’s political establishment, “cut spending” (pet projects) , something, that is totally unfamiliar to all concerned. What? How dare for anyone to suggest Congress has pet projects receiving favoritism?
Yet, with the 12 member super committee in place and looking at anything in “fat”, certain senators, house representatives, may see their “darling projects” floating down the drain. In turn, the respective politician of that district or state, may also see his/her chances for re-election dwindling down. People have a short memory,and once the dollars flowing from that “faucet”, dry up, so does support and that is synonymous with not getting votes.
Too bad Mr. money pockets. Yet it is a fact, the rope around the nation’s neck is already very tight. U.S. public debt, (the money borrowed by the government through the issue of securities by the Treasury and other federal agencies) stood at $14.34 trillion dollars on August 3rd, 2011. (The U.S. debt ceiling was lifted the prior day)
Forecasted U.S. 2020 debt held by the public is expected to exceed $16 trillion, near 70% of GDP, and the combination of rising debt and rising interest rate (rates increase with more debt) is projected to cause interest payments on that debt to rise to near $800 billion. That interest is unreal.
The painful reality, our public debt increased by over $500 billion in every fiscal year since 2003, and as soon as the Obama administration came to power right away to over $1 trillion in 2008, $1.9 trillion in 2009 and $1.7 trillion in 2010. A simply wonderful achievement of mismanaging the U.S. finances, while in the process, breaking the back bone of many Americans.
To reduce spending should have started under President Bush and certainly under President Obama. Both knew and were warned of the consequences, yet did nothing, and now it is left to the 12 member super committee to decide where, when and what to cut. If no cuts are enacted, we may head towards the same path as the Greece example?
Greece, just like the U.S. lived beyond its means. It’s public debt stood at 142.8 percent of GDP (2010). Our U.S. public debt in relation to GDP (2010) came to 92.28% on a $14,66 trillion GDP, rising to 102.63 % of GDP in the current fiscal year on an estimated $15.08 trillion GDP, and even more in fiscal 2012, to 105.63% at an estimated GDP of $15.81 trillion.
To stave off bankruptcy, Greece agreed to several austerity packages. Greece denationalized companies, sold national property, increased payroll taxes, value added tax by 35%, cut bonuses, salaries of all government and public employees by 15% in several steps, increased taxes on pensions, property, imported goods and more. In all, projected GDP (2nd q 2011) had a negative -6.9% GDP growth with unemployment rising to 16.6%. Despite, it may not be enough.
Will our nation learn from Greece’s example?