Last week, the US Senate proposed an increase of the federal debt limit by $1.9 trillion dollars to $14.3 trillion dollars total. Over the last decade, both Republican and Democrat controlled Congresses have allowed spending to go out of control. Several "credit limit increases" were necessary to continue supporting the spending habits of our Representatives and now they, and the White House want more.
In March of 2006, Congress raised the Federal debt limit to $9 trillion, which was the fourth time in five years (beginning in 2001 when the US debt limit was only $5.6 trillion dollars). Understandably, foreign countries buying the treasury bills and bonds that support our government's spending grew nervous about the ability of the American government to pay off the debt. The situation was exacerbated by the events to come. In October of 2008, the federal debt limit broke $10 trillion, and the "national debt clock", maintained by the Durst Organization, ran out of digits. America is now in a recession and will run higher deficits this year.
In 2006, then Senator Barack Obama voted against an increase in the debt limit, saying, "America has a debt problem and a failure of leadership." Congress echoed his concern, but has done nothing to stop the problem. In fact, spending was accelerated. Even now, when America owes more than $12 trillion dollars, the White House and now President Obama has requested another increase. ABC News reported,
"The administration strongly supports passage of an increase in the public debt limit," the White House said in a statement. "Such an increase is critically important to make sure that financing of federal government operations can continue without interruption and that the creditworthiness of the United States is not called into question." The nation's overall debt now stands at more than $12.3 trillion after soaring over the $12 trillion mark for the first time ever last November. (ABCNEWS, Jan 20, 2010).
The problem is that the creditworthiness of the United States is already in question and is becoming a problem that will be irresolvable unless changes are made in the next election. Bottom line, simple accounting shows that debt increases when net expenses are greater than net income. Even with 100% taxation the government could not raise enough money to cover the spending being discussed on the floor of the House this year, so increasing income is not an effective solution. Simple deduction states that spending must be cut. The graph below illustrates how spending has been out of control since the 1970s and does not even include the huge deficits of the last 5 years.
Figure 1. Gross Federal Debt Compared to the U.S. Economy. (http://www.npr.org/templates/story/story.php?storyId=5282521)
