A Debtor Nation

"The fortunes we have heard so much about in the days of speculation, have melted like the snows before an April sun."

John Steele Gordon provided this quote in his excellent WSJ article, "A Short History of the National Debt."

The man who spoke those words was a Wall Street trader in the 1830's. Booms and busts, bubbles and crashes are a part of a natural economic cycle for all nations. Even the US falls prey to the predations of human nature.

A trillion dollars (current annual budget deficit) is a lot of money. $10 trillion is the size of the national debt, and total liabilities including entitlements is said to be around $60 trillion. The Federal Government spent over $400 billion in interest on the debt last year.

John Steele Gordon puts this in perspective for us:

In January, the Congressional Budget Office projected that the deficit this year would be $1.2 trillion before the stimulus package. That's more than twice the deficit in fiscal 2008, more than the entire GDP of all but a handful of countries, and more, in nominal dollars, than the entire United States national debt in 1982.

But while the sum is huge, it is not in and of itself threatening to the solvency of the Republic. At 8.3% of GDP, this year's deficit is by far the largest since World War II. But the total debt is, as of now, still under 75% of GDP. It was almost 130% following World War II. (Japan's national debt right now is not far from 180% of that nation's GDP.)

He goes on to say that what is really worrisome is the trend. Washington is incapable of stanching the flow of red ink. Spending taxpayer money on chimeric schemes to cure all ills is just too much fun.

http://online.wsj.com/article/SB123491373049303821.html?mod=loomia&loomia_si=t0:a16:g2:r2:c0.33881:b0
http://www.federalbudget.com/