Business writer Grand News New Haven Ct
Today our nation’s scheme to keep up with mounting debt, which I am too patriotic to imagine as intentional and malicious like Madoff’s con game, resembles a Ponzi, and that is cause for grave concern and a call for radical change. We are not generating nearly enough revenue to offset the gigantic mountain of debt pressing down on top of our financial house of cards. The U.S. increasingly puts itself into a position where we must rely on the sales of new Treasury notes and bonds to keep up with the interest on previously issued instruments. This sounds Ponzi-esque to me.
As the financially devastating month of September 2008 came to an end, for example, the United States government was carrying $10 trillion dollars of debt owed to lenders outside the USA – one trillion dollars more than the previous year. That equals a debt increase of $2,900 for every man, woman, and child in the nation over the year before.
According to Gillespie Research/Federal Reserve, foreigners own about $9 trillion of U.S. financial assets, including 13 percent of all stocks, and nearly 30 percent of our corporate bonds. And they are acquiring more all the time, which gives them increased power and say-so regarding our native businesses. Even Fannie Mae, an agency created by Congress in order to ensure the availability of affordable mortgages for average Americans, turns to sources outside the USA for approximately 35 cents of every dollar.
Consider this statement from David Walker, the U.S. Comptroller General:
“Foreign interests have more control over the US economy than Americans, leaving the country in a state that is financially imprudent. More and more of our debt is held by foreign countries – some of which are our allies and some are not. The huge holdings of American government debt by countries such as China and Saudi Arabia could leave a powerful financial weapon in the hands of countries that may be hostile to US corporate and diplomatic interests”.
Of the $10 trillion in total federal government debt outstanding at the end of 2008, approximately $5.1 trillion was in the form of Treasury bonds and T-bills. Of that, nearly half was owed to foreign interests, including $700 billion owed to China. That number is about the same amount as our new economic stimulus package that is meant to save us from economic ruin.
Lucky for us, China continues to invest in the USA. In fact, China’s heavy purchase of our Treasury bonds is why we enjoy low interest rates to fund a war, provide public services, offer a stimulus plan, and line the silk pockets of irresponsible Wall Street firms and big banks.
But the Chinese are not investing here on the basis of our attractive economic future. They invest here because they desperately need for us to succeed. Otherwise it means a huge loss of debt payment income we owe to them.
Our country spent more than $300 billion last year, just to service interest payments on outstanding debt. Meanwhile we owe ourselves $3.3 trillion of debt accumulated through the internal habit of borrowing from Peter to pay Paul with IOU’s skimmed from sources including the Social Security trust fund. So far the government has drained $13 trillion from that fund alone, so we are not just borrowing from our parents and ourselves but also from our children and grandchildren.
Spread equally across the 304 million citizens of the USA, our total debt adds up to a staggering $49,342,00 owed by each and every person, including those still cruising around in strollers and diapers.
We have become so accustomed to hearing about the trillions of dollars we are in debt. Watching the numbers rise meteorically has desensitized us to what it all really means.
Let’s add it all up as follows: $10 trillion is existing debt. $1 trillion is the budget short fall in 2009, and $350 billion in TARP funds have already been disbursed to banks – with another $350 billion in TARP funds to be released next. $1 trillion was earmarked to banks for troubled assets, $790 billion for new stimulus spending, and $3.3 trillion was borrowed from ourselves from programs like Social Security. The grand total is $15 trillion, divided amongst 304 million Americans. That adds up to a whopping $49,342 per person, which is a 50% increase in our debt from what was it was at the end of 2008.
In order to truly appreciate what the nation now owes on an indivual level, imagine the U.S. government paying off its debt by sending all 304 million men ,women and children a bill for $49,342 That figure represents their share of the overall debt. But as a practical matter, people in the government know they cannot expect the majority of taxpayers to pay this debt in one lump sum. So let’s say they offer you terms similar to a revolving credit card account and they spread the $49,342 over 15years at 3.5% interest. Your monthly payment for each household member will still come to $352.74 per month. Understanding that can help us comprehend the magnitude of the problem and what it will take to solve our debt crisis.
It is as simple as it looks complicated we so not have the revenues we take in from taxes anywhere near sufficient to run the government on a day to day basis, let alone fund special projects and pay off our obligations. Our current system of financial management is dangerous. It requires serious restructuring, which must include a plan for reducing both internal and external debt and finding sustainable solutions to our hazardous and lopsided dependence upon foreign interests and powers.
End
Andy Ross
612 Chapel Street
New Haven CT 06511 andy@andyrossgroup.com 203-641-4666
Real Estate and Commercial Loan Broker
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