CBO says debt will reach 62 percent of GDP by year’s end

Posted by Kendall Harmon

The national debt will reach 62 percent of gross domestic product (GDP) by the end of this year, the nonpartisan Congressional Budget Office (CBO) said Wednesday.

The budget office said the debt will reach its highest percentage of GDP since the end of World War II. The jump is driven by lower tax revenues and higher federal spending in the recent recession.

Read it all.

Filed under: * Economics, PoliticsEconomyThe U.S. GovernmentBudgetThe National DeficitPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

Posted June 30, 2010 at 5:51 pm [Printer Friendly] [Print w/ comments]

1. azusa wrote:

“The jump is driven by lower tax revenues and higher federal spending in the recent recession.”
What would Mr Micawber say?

June 30, 11:55 pm | [comment link]
2. Albeit wrote:

You would think that the folks in Washington D.C. would have enough common sense to know that “you can’t spend your way out of debt using hideous amounts of money that you had to borrow in the first place.”  It doesn’t take a Harvard accountant to figure that out.

Then again, maybe it’s just another case of Wimpy Politics. What is it that Popeye’s forever broke buddy, J. Wellington Wimpy, used to say? “I will gladly pay you Tuesday for a hamburger today!”

July 1, 12:24 am | [comment link]
3. Br. Michael wrote:

And note that we will address the deficit tomorrow.  Except tomorrow never comes.  In the bad times we need to prime the pump and in the good times we need new programs.  In all cases the Government is hopeless addicted to spending money.

July 1, 7:07 am | [comment link]
4. TomRightmyer wrote:

For some years the government has kept interest rates low, taking money from savers to spend. Time has come to reverse that policy.

July 1, 8:24 am | [comment link]
5. David Keller wrote:

If you think things are bad now, wait until next year when the Bush tax cuts expire.  Revenue will NOT go up; it will drop, interest rates will go up, business hiring will go down and economic growth will be, at best, flat.  We could easily have a double dip recession. That is part of the reason the stock market is heading south rught now. But of couse, its not the current administration’s fault—apparently nothing is their fault.

July 1, 9:01 am | [comment link]
6. Br. Michael wrote:

5, I have it on good authority that “Bush did it”.

July 1, 9:28 am | [comment link]
7. C. Wingate wrote:

Albeit, according to that argument you could never start a business by borrowing money either. I fail to see how balancing the budget by cutting expenses (#1 being getting out of the middle east) and raising taxes is going to help the rest of the economy; reducing the federal debt at this point is basically recalling dollar bills and burning them without replacing them. It seems to me that this is something you do when the economy is flush and can afford the losses.

July 1, 9:30 am | [comment link]
8. John Wilkins wrote:

People need to be spending more.  How does that happen?  If the unemployed won’t spend more, and the banks won’t lend to businesses, who will do it?

July 1, 10:21 am | [comment link]
9. Clueless wrote:

“People need to be spending more.  How does that happen?  If the unemployed won’t spend more, and the banks won’t lend to businesses, who will do it? “

No.  People need to be living within their means.  That means regulation, litigation and societies parasites need to go.  If somebody wishes to work for a dollar an hour, and live in a tent in the woods, they should be allowed to do so.  If somebody else wishes to have them wash dishes in a restarant for 2 meals/day they should be allowed to do so.  The money is saved, and used to build a business.  That is the way my formerly illegal immigrant neighbor earned enough to eventually open his own auto shop.  He is grateful to the man who paid him a dollar an hour to teach him his trade, working 8 hours/day, and he is grateful to the man who paid him 2 meals a day to spend four hours in the evening washing dishes.  He now owns his own shop, home, and a couple of investment properties, all of which are paid off. 

Not enough people spending or borrowing money is not the problem.  Not being able to save money is the problem.

Nobody needs to “lend to business”.  People need the opportunity to save money without their money being confiscated.  I would love to open a business.  There is a need for a laundromat that I think would be good, HOWEVER, if I did so, I would be suddenly liable for sudden confiscatory “toxic site fees” that would materialize out of nowhere, and anybody I hired would need to be paid minimum wage, plus health benefits, plus unemployment benefits plus social security, and frankly they would not be worth it.  Ergo, I will not open such a business until I retire from my current job, and then I will not hire anybody, I will do the work myself.

Similarly I would like to buy a farm. However, between the regulations on the use of pesticides, the proper treatment of food, the care of the animals, not being allowed to spread chicken or pig manure to improve the land etc. etc. etc. not to mention the fact that anybody I hired would need to have minimum wage/ss/unempl/health etc. again, I can’t afford to start a farm until I retire and do the work myself for nothing.  However a farm would be a pretty good job for somebody who had another job.  (Free housing, and food).  I know my neighbor would have taken it in a heart beat back when he was working 12 hours a day and sleeping in the woods.  It is illegal to offer anybody such a job, however.  It would be considered “fraud and abuse”.  So folks who could be employed at a price that was the worth of their labor are unemployed.

Thus, my money is in the bank for now, though the way they are printing money I may buy land anyway just to keep my savings from evaporating from inflation, though of course if I do, it may be property taxed into oblivion.  I may choose to buy land in a foreign country instead.  It may be easier to build capital there, then in the US. 

Other folk make similar calculations.

It is not necessary to have all employers provide health insurance.  What is necessary is to drop the regulations on how medicinee is practiced.  Let pharmacists, nurses and anybody who takes a one year health course prescribe most (nonaddictive) medications.  Then anybody who had bronchitis or diabetes or hypertension could get their refills and cut out the middle man.  Let physicians have a real free market.  Let there be “level 1” doctors who cannot be sued, accept only cash on the barrel, keep no paperwork and work out of their homes.  If there was no overhead (no office, malpractice insurance, billing staff etc). physicians could afford to drop their prices to about 50 dollars/hour (which is similar to hair dressers who don’t have their student debt).  (Folks who do procedures or who work in hospitals would have to be level 2, those who do surgery will need to be level three. ).  This means that insurance would only cover level 2 or 3, and the majority of medicine (clinic style) would go back to being low cost and paid for out of pocket.

Similarly it is not necessary for medical school to cost 40,000/year.  The ONLY reason it does is the gigantic regulations on schools (they need to be doing x amount of research have x amount of research lab space, x amount of books in the library (even though most folk use the internet nowadays) etc.  The first two years of medicine could be handled in a regular college, and the last two years of medicine could be handled in the hospitals free as an apprenticeship.  The hospitals already provide medical student training free (I know I’m not getting paid to teach the lot I have every day). 

Similarly college should cost 20,000/year.  Let there be national exams in every subject.  If you can pass the national examination on American history (by studying on your own) you should get automatic 3 credits toward any US degree. 

Again, if one did this, costs would drop.  Just as one would not have the gigantic health insurance costs which mainly keep bureacrats and lawyers in business, we would not have the gigantic educational costs which also mainly keep bureacrats and lawyers in business. 

The problem is not the need to borrow more in order to spend more.  The problem is the legions of government parasites, lawyers, administrators and middle men who insist on tacking fees and regulations onto every transaction so as to make it impossible for folks to “live within their means”.

July 1, 11:00 am | [comment link]
10. Clueless wrote:

that should be college should NOT cost 20,000/year.  It should be under 1000 done as above.

July 1, 11:03 am | [comment link]
11. David Keller wrote:

#9—All good points, but 8 and 9 think about this—if we had done $800B in tax cuts instead of that much in “porkulus” think about what this ecomomy would be doing. I don’t advocate that large a tax cut, but raising taxes won’t help, it will hurt. The current occupant in the White House is not capable of comprehending that tax cuts bring in greater revenue, but we have imperical proof under Kennedy and Reagan.

July 1, 11:38 am | [comment link]
12. David Keller wrote:

And #9—College already doesn’t cost $20K—its way more that that!

July 1, 11:39 am | [comment link]
13. Clueless wrote:

My kid’s college (university of Missouri) costs less than 20,000/year (about 12,000/year for instate tuition) more if you are going to live in the dorm, take courses in Guetemala or costa rica or paris during the summer etc).  It is still under 25,000 with the above.  I don’t see any point in paying 50,000 a year for college, and my kid would prefer to emerge free of student loans than pay extra also.

However there is no reason it should even cost 20,000/year.  If it were legal (as it is in India) 3 bright PhDs could set up their own “university” and take in 100 kids each paying 1,000/year and pay themselves 20,000 while covering rent.  If they expanded to 500 kids they could have 5 pHDs and pay themselves 60 thousand.  And it would be a great experience where you could really know your teacher, and where your teacher would really, really want you to succeed.

The only reason pHDs are unemployed and permanently temping for subminimum wage for universities which cost students 50,000 while screwing the teachers is because of governmental and legal parasites.

July 1, 12:29 pm | [comment link]
14. New Reformation Advocate wrote:

Hmmm.  As the old Southern adage goes, “If you’re in a hole, stop digging.”  Alas, Prov. 22:7 is going to come back to bite us—hard.  “The borrower is slave to the lender.

Everybody knows that the current pattern of trying to stiumlate the economy and spend our way out of trouble isn’t sustainable.  But unfortunately, rational analysis seldom carries the day in Washington.  For we’re dealing with an addiction here, the out-of-control Fed addiction to spending lots more than it takes in.  And addictions aren’t overcome through merely rational means, but rather through being forced to face the drastic consequences of such self-destructive behavior and getting the outside help required.  But since “We the People” are the addicts in question, who will save us from ourselves??

David Handy+

July 1, 12:30 pm | [comment link]
15. David Keller wrote:

#14—Speaking of addictions—I just heard on the news that the Democrats won’t vote for war funding if they can’t add billions of pork to it.  The thing I can’t understand is why some estute politician won’t tell us the names of the people who are adding prok projects and how much they are.  Also, on Fox they are decrying it but on NPR they are saying this is just normal for these types of supplemental appropriations bills.  And amazingly they are also reporting that THE ONE is calling theh Repuplicain leadership for help—you know, the same guys he trashed on national TV yesterday. I report, you decide.

July 1, 2:47 pm | [comment link]
16. Clueless wrote:

The trouble is that the producers (including educators, physicians, home builders, automechanics, farmers etc.) have been enslaved by the parasites (the regulators, lawyers, administrators etc.  It is not possible to deal directly with the consumer, one needs to go through several layers of other people who have managed to introduce laws that basically allows them to live off of other people’s labor. 

Politicians, lawyers and the drones in administration and government drones are the new rentier class.  Everybody else is forced into debt in order to feed them while doing the actual work.

Sort of like Napoleon in Animal farm

July 1, 3:43 pm | [comment link]
17. Albeit wrote:

#7. C. Wingate: I don’t know a single financial person who would advocate obtaining multiple credit cards at higher rates in order to use them to pay off your old credit cards. Experian and other credit raters highly frowns on this practice. We are approaching 14 TRILLION DOLLARS in national debt and it’s soon going to demand 62% of our GNP just to pay the service costs on it.

Frankly, I wish this were, to reference your response, about “starting a new business,” but it isn’t. It’s about keeping the balls in the air in the hopes that the bill collectors won’t show up at the door. No matter the spin you try to put on it, it’s simply not possible to spend your way (read: “print or borrow more money”) out of debt.

By example, it was “Breaking News!” today that, following New York States imposition of the new “Millionaire’s Tax” bringing it up to over 15%,” there’s a mass exodus to Connecticut where it is only 5%.  Again, no Harvard accountant required here to figure this one out.

July 1, 7:08 pm | [comment link]
18. Mark Johnson wrote:

A faster way to save money would be to slash defense spending - it’s ridiculous what we’re spending. Part of the problem with Washington is everyone is against “pork” projects unless it’s in the congressman/woman’s own district, then it’s completely necessary it seems.

July 1, 9:10 pm | [comment link]
19. C. Wingate wrote:

Albeit, it’s not a given that household or corporate finance is a sufficient analogue to national finance.

If government revenues go up, and the debt serviced doesn’t get too big, and expenditures are restrained, then perhaps eventually the deficit can be made to go away. One’s faith in being able to balance the budget rests upon one’s belief in the consequences of increased taxes and lowered expenditures. You have to hope that the cuts are not going to drive your revenues down and increase demands on expenditures anyway, leaving you with a deficit you can’t get rid of.

Decades of Republican overspending and undertaxing have put us in this spot, so the first thing to put on your list (if the experience of the Clinton White House is any indication) is to pull the D lever for president and the R lever for your reps and senators.

July 1, 9:28 pm | [comment link]
20. Albeit wrote:

#19. C. Wingate: As someone who is retired from 32 years of government service and is also a Vietnam Era Veteran, let me assure you that the “IF” you are so dependent upon in your “CAN DO!” scenario is nothing more than a myth. My government service dates all the way back to “Spend Your Bucks” Johnson, who made the other Presidents look like Amateurs when it came to expanding government programs and spending. Carter was a close second.

Label me cynical if you like, but over those many years I worked with more deadwood than can be found in the fire ravaged hills of California. Care to guess who paid for all the useless programs and employees I encountered and how they got the money to do it?  I assure you, I could write a book.

Incidentally, I may help for you to know that I’m neither a Republican or a Democrat, as it is my experience that government ineptness finds its home in both houses. As for the politicians, most I had met were more than a little intoxicated by power, no matter how genuine they attempted to be. (Again, party affiliation doesn’t seem to matter with regard to abusing power.)

Regardless, this nation is drowning in debt and this Administration and Congress are simply piling it on at an unimaginable rate. I don’t believe that we’re in an economic disaster just yet, but sorry to say, I feel that we’re clearly headed in that direction.

July 1, 11:28 pm | [comment link]
21. John Wilkins wrote:

War is pork.

I appreciate Clueless’s idealism.  Those who are unemployed should live within their means.  It might mean homelessness, of course.  It might mean living as indentured servants.  Perhaps eating spam every night.  It’s a good way to see the economy continue to contract.

Of course, people might not like that view.  They might get restless and cause trouble, meaning that there are more police on the streets.  But are we paying the police?  Perhaps we’ve cut their salaries and pensions. 

David handy says “everybody.”  Well, that’s not entirely correct.  Several economists noted that we really needed double the stimulus to get us out of our current state.  Obama chose the conservative route - as FDR did.  It’s 1937 all over again.  Probably the only way to encourage more spending is to get us into another war (which I’m sure David Handy, and others, would support).  And then we’ll get out of the current funk.

July 2, 12:32 am | [comment link]
22. Larry Morse wrote:

We live and live high because we spend and we spend high. The dependence of one on the other is indisputable and apparently fixed. But what other system is there that will give us economic and social freedom? I got through Economics 101 but with little to say for my performance. I could never get the answers I wanted in the Gray Science. And nothing has changed. What other choice is there? I have puzzled over this for years. The only ” answer” I can find is a society that relies heavily on self sufficiency - which means a largely agricultural society. This means a society of limited population, a society given over to work - by which I mean labor - a society of small town and limited industrialization. But if such is possible, then we will never get to the stars, and how can mankind survive if he does not aspire to the stars?
    Simple minded? I suppose so, but I am as baffled now as I ever was about the horrors of the Consumer Society: THIS is the road to the Brave New World.  Larry

July 2, 9:40 am | [comment link]
23. Sarah wrote:

RE: “A faster way to save money would be to slash defense spending - it’s ridiculous what we’re spending.”

Well—there is the problem that military defense is one of the few activities that the Federal government is supposed to be responsible for in our Constitution.

So your next sentence about “pork” is unrelated.  Military defense is one of the central functions of the Federal government—unlike all the other unconstitutional things that the State is controlling.,

The only refreshing thing about the past year and change has been the—once again—demonstrated massive failure of Keynsian theory.  I think a whole lot of peons—average business owners, tradespeople [my local mechanic, for instance]—are getting it now.  Almost every single thing Obama has done has been directly and antithetically the wrong thing for actually expanding the economy and allowing businesses to invest in jobs and recover.

More and more people recognize that—and at least that’s a good thing, with all of the misery going around.

July 2, 10:17 am | [comment link]
24. C. Wingate wrote:

Sarah, President “no foreign entanglements” Washington would hardly have approved of our war adventures in Iraq and Afghanistan; withdraw from those and that’s half the deficit right there.

Albeit, debt as a percentage of GDP declined steadily through the 1960s; of course, that was back in the days of high taxes. Large deficits arrived in the mid-1970s and notched up with Reagan’s election. You can look at a chart of deficit as a % of GDP and easily pick out the Clinton period: it’s the long steady decline interrupting the consistent 3-5% pattern up to his election.

July 2, 12:56 pm | [comment link]
25. Clueless wrote:

John wrote: “I appreciate Clueless’s idealism.  Those who are unemployed should live within their means.  It might mean homelessness, of course.  It might mean living as indentured servants.  Perhaps eating spam every night.  It’s a good way to see the economy continue to contract.”

What is student debt other than forced indentured servitude?  This debt cannot be discharged in bancruptcy.  The government will garnish your paycheck and even throw you in jail if you fail to pay it.  Further, the only reason that debt is so high is to create make work jobs for administrators and regulators.  If debt were limited to monies paid to university professors it would be minimal.

Having been an “indentured servant”  myself for 4 years (an intern and neurology resident)  I have mixed feelings about indentured servitude.

The negatives are:  It pays subminimal wage per hour, permits working conditions that are little better than slavery with forced work despite illness, family needs, and does not permit sleep if the needs of “your betters” are inconvenienced by this.

If you run away, (some poor fools do) you will never work in medicine again and your stuent debt will trap you in low wage jobs forever.

The positives:
It does teach you a trade.
It allows you to achieve stamina and knowledge that will serve you well when you are working “for yourself”.
It will cover 3 squares and low income housing (my housing at Johns hopkins was both cockroach and rat infested and had been condemned by the city of Baltimore for 3 years before I moved in)  It did encourage me to spend more time at the hospital, however.

It is a job.  An honest job.  Nobody is being enslaved through either taxes on the present generation or debt on the future in order to keep you from having to work for a living.

What is debt other than forced indentured servitude of later generations, John?  And why is it “idealistic” to indenture others in order to avoid indenturing oneself?

July 2, 1:30 pm | [comment link]
26. Sarah wrote:

RE: “Sarah, President “no foreign entanglements” Washington would hardly have approved of our war adventures in Iraq and Afghanistan. . . “

Perhaps.  I’ll be happy to withdraw from Iraq and Afghanistan—but since the threat of radical Islamic jihad would still therefore exist, we would have to pour the money we are spending there into our border guard—which would be where the military would need to be redeployed . . .

And so . . . Re: “withdraw from those and that’s half the deficit right there” would be incorrect.

One of the main purposes of the Federal government is to defend our country.  A good chunk of our budget should therefore be spent on that.

July 2, 7:42 pm | [comment link]
27. Br. Michael wrote:

And to defend our borders ranther than leave them open to Mexican invasion and sueing States who have to do the job the Federal Government and the President have abdicated in derogation of their oaths of office.

July 2, 8:24 pm | [comment link]
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