Economy Caught in Depression, Not Recession: Rosenberg

By: Jeff Cox
CNBC.com Staff Writer

Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression, Gluskin Sheff economist David Rosenberg said Tuesday.

Writing in his daily briefing to investors, Rosenberg said the Great Depression also had its high points, with a series of positive GDP reports and sharp stock market gains.

But then as now, those signs of recovery were unsustainable and only provided a false sense of stability, said Rosenberg.

Rosenberg calls current economic conditions "a depression, and not just some garden-variety recession," and notes that any good news both during the initial 1929-33 recession and the one that began in 2008 triggered "euphoric response."

"Such is human nature and nobody can be blamed for trying to be optimistic; however, in the money management business, we have a fiduciary responsibility to be as realistic as possible about the outlook for the economy and the market at all times," he said.

The 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent, sending the stock market to a 50 percent rally in early 1930 as investors thought the worst had passed.

"False premise," Rosenberg said. "And guess what? We may well be reliving history here. If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%."

Rosenberg's warning comes as a slew of major analysts—Goldman Sachs andJPMorgan among them—have slashed GDP projections for 2010 to the 1.5 to 2 percent range.

Chicago Federal Reserve President Charles Evans said in a speech Tuesday that the risk of a double-dip recession has escalated. He said government programs to help distressed homeowners have been ineffective and aren't helping the pivotal housing sector recover.

The dour outlooks come on the same day that the National Association of Realtors said home sales reached a 15-year low in June, dousing hopes that the industry had reached a bottoming point.

Rosenberg points out that the "overall economic malaise" has come despite aggressive efforts by the Federal Reserve to stimulate the economy through rate cuts. The central bank itself has scaled back its economic projections, has held steady on its balance sheet, and could be announcing another round of quantitative easing measures at its Jackson Hole summit this week.

"How's that for a reality check," Rosenberg said. "It's not too late, by the way, to shift course if you have stayed long this market."

The Next Generation's Debt Burden

"Addressing the challenge of our national debt requires bold leadership and tough choices from members of both parties.  Our children and grandchildren are counting on us to chart an effective course toward responsible stewardship of the public purse."                                                 -Speaker Nancy Pelosi, March 24, 2010

As the Wall Street Journal recently reported, out-of-control spending by the Democrat controlled Congress has added an astounding $4.4 trillion in deficits to the Congressional Budget Office’s (CBO) ten year budget projection.  And despite claims of fiscal responsibility from the Democrats, nothing changes.  The harmful effects of the Democrats’ runaway spending on growth and prosperity are vast.  Crowding out of private investment, growing interest payments, and dependence on foreign competitors are all consequences of the federal government’s profligate spending and debt.  Additionally, the debt explosion created to fuel Washington’s recklessness has a personal impact on every American: it is ultimately borne by every man, woman and child in the nation.  According to CBO and Census Bureau long-term estimates, the amount of debt placed on the backs of children born today is about to explode.  If nothing is done, our generation will have the sad legacy of being the first to lower the standard of living of the next generation. 

A TIMELINE OF THE PERSONAL PUBLIC DEBT BURDEN FOR A CHILD BORN IN 2010

 
2010:  By the end of 2010, CBO predicts that the total U.S. debt held by the public (as opposed to the gross national debt which includes inter-governmental holdings) will be $9.05 trillion.  That means that children born in 2010 will start life with a personal share of the public debt equaling $29,178.
 

2020:  When children born today celebrate their tenth birthday, their share of the nation’s public debt will have already increased by 70 percent to reach $49,694 per child. 

2023: By the time they are 13 years old, their share of public debt will have doubled to $58,971. This is also the first year that per capita Gross Domestic Product (GDP) will be surpassed by the per capita share of the public debt for every American.

2028: When those children born in 2010 reach their 18th birthdays, they will have inherited an individual debt responsibility of $80,650.

2032: As children born in 2010 begin to graduate from college and enter the work force, their public debt responsibility will have tripled.  As they begin their adult lives, the next generation will already be saddled with $103,826 of the government’s debt. And, unfortunately, as interest payments and entitlement spending increase more rapidly, their share of the nation’s debt will begin to grow at an accelerated rate.

2040: At the age of 30, their public debt responsibility will be approximately $166,500—an increase of 471 percent from the time that they were born. 

2050: If government spending is not immediately restrained, our nation’s public debt is projected to increase from $9.1 trillion in 2010 to $122.8 trillion by 2050.  As a result, when children born today reach 40 years old, their share of the U.S. public debt will be $279,738—an increase of 859 percent above what it is today.  For a family of four, the total household debt share would be approximately $1.119 million.

THE OUTLOOK FOR THE NEXT GENERATION: DEBT EXPLODES AND PROSPERITY STAGNATES

• According to estimates from CBO and the Census Bureau, per capita GDP in the U.S. is approximately $47,000 in 2010, which is $17,883 more than the current level of public debt per person ($29,178).  Reckless Washington spending will soon send the individual public debt burden skyrocketing past per capita GDP as spending and debt replace private economic growth.
• In 2023, the amount of U.S. public debt shared by every man, woman, and child in the nation will exceed their share of our nation’s GDP as debt rapidly out paces growth.
• While the individual public debt burden is projected to increase by $250,560 over the next 40 years, the GDP per American is only estimated to grow by $34,258.
• Over the next 40 years, estimates predict that spending will cause the debt held by the public to increase by 859 percent for every U.S. citizen.  By comparison, per capita GDP is projected to grow by only 73 percent over the same period.
• Unless drastic actions are taken to reduce spending now and in the future, debt will dwarf growth and future generations will be less prosperous than those that preceded them.

We, the People, deserve better! - Part II

The problem is so much larger than Republican vs Democrat, and China is only part of the problem.

However, as the following document from the Treasury Department will show, China may be the largest holder of treasuries, but they are not the only ones. http://www.ustreas.gov/tic/mfh.txt Is it cause for concern? Absolutely.

A point that many Republicans and Democrats disagree on is tax cuts. Tax cuts spurred the economy and created growth. In fact, the Dow Jones hit it's all time high of over 14,000 in 2006. Unemployment was at all time lows.

Jack Kemp, Bob Doles' 1996 vice presidential nominee, once told me that if the government taxes at 0% the government will receive no revenue (obviously). If the government taxes at 100%, the government will also receive no revenue. The reason - nobody wants to work for free. The question isn't whether someone is willing to pay taxes. There are a few who, wrongfully, insist that the government shouldn't tax anyone - yada yada, but they are a very small minority. The question should be what is the tax rate that garnishes the most benefit for the people, businesses and the government. What is the maximum rate that will allow the economy to grow and employ more people, while at the same time maximizing revenues to the government and simultaneously allow people to keep a good sized portion of their revenue? He said this because when the tax rate is too low, the government doesn't receive enough revenue to provide for the common defense and the welfare (not the welfare programs, mind you) of the people. If the tax rate is too high, government revenues go down because people start moving their capital overseas or placing them in tax shelters. He estimated (in 1997) that the maximum tax rate should be around 18%.

However, there is still another factor to be considered - the monetary policy of the Federal Reserve. I'm not one of those who wants to End the Fed, and don't believe there is this vast conspiracy of the Federal Reserve. Yet we have since learned that when the Fed doesn't do it's job properly, it severely impacts the economy by creating inflationary bubbles - aka Alan Greenspan keeping the interest rates artificially low. This was a contributing factor into the recent housing crash, which bled into other sectors of the economy.

Ultimately, if we are to continue to exist as a nation, we need to get our spending under control. We need to insist that the budget be balanced. Prior to the Obama administration, the largest yearly deficit was $465 billion dollars. Out of a then $3 trillion budget, I'm sure we could have found ways to cut $465 billion in a given year through eliminating waste, fraud and abuse; streamlining government by eliminating duplication of services among Federal agencies, ended antiquated programs and departments - and then, if there is still a need to trim, start cutting programs and services.

If we were to eliminate our National Debt by paying it off, we would then be bargaining with China out of a position of strength instead of economic weakness. Ask any Congressman what he/she would do with an extra $500 billion each year and I'm sure you would find a wishlist a mile long. If we were to eliminate the National Debt, our economy would grow and we could then take that extra $500B and invest it into more social programs, better military equipment, save social security, expand the S-CHIPS program and still have money left over.

Until We, the People, see this, nothing will change regardless of what party is in power. 

We, the People, deserve better!

As more Americans discuss the economic State of the Union, I've heard a lot more people offer comments like "G.W.B. put our Country in a huge amount of debt to one nation we should never be in debt to...China." 

After studying the National Debt quite in-depthly for the past six years, it's time to take a look at not only the accuracy of statements like this, but what "We, the People" as a whole fail to understand about the National Debt.

The people who put our country in a huge amount of debt is Congress. The National Debt was established in 1791 as a way of paying off all of our war debt from the Revolutionary War (side note: Since some states had already paid off their share of the debt, and others hadn't, there was a lot of bargaining going back and forth between Alexander Hamilton and the representatives of Pennsylvania and Virginia, primarily. In exchange for these hold out states financially uniting with their geographical brethren, the U.S. Capitol was moved from New York to Philadelphia temporarily until a new national capitol was built from land previously owned by Virginia and Maryland on the banks of the Potomac river. Washington D.C. would never been established where it is except for the war debt agreement, but I digress.)

The national debt rose and fell from 1791 to 1959. It was nearly paid off in two consecutive years - 1835 and 1836 - before the Specie Circular was released by Andrew Jackson, demanding all land grant payments to be made in gold or silver only - no greenbacks. In fact, in 1830 Jackson vetoed the "Mayville Road" project in Kentucky because it would have required federal funds going into a road - something that was unheard of at that time. Our country was on the course to eliminate the debt and our leadership wanted to accomplish that goal. (For more on the "Mayville Road" click here)

   

The last year that the debt was paid down was 1959, when President Dwight Eisenhower was still President. It has risen every year since then - at astronomical proportions. Even during the Clinton years the debt still grew, despite the rhetoric out of ill-informed Democrats who insist that the debt went down during the Clinton era. It grew by a "paltry" (and I use that term lightly) $17 billion in 1999 - it's smallest growth since 1959.

The reason behind this is compound interest and the refunding of the debt. Neither party takes this problem seriously.

We don't understand the fact that when you print money, every time a bond is issued on the market, the value of the dollar goes down in relation to other currencies. We don't understand that when bills, bonds and notes mature, new bills, bonds and notes are taken out to pay the principle and interest on the old ones. We don't understand the fact that in the month of June 2010 alone (per www.treasurydirect.gov), we taxpayers paid over $106 billion in interest payments. In the entire fiscal year to-date (Oct. 1, 2009 - July 31, 2010) we paid over $375 billion in interest payments with two months left to go. The entire debt in 1969 was $368 billion.

If we, the people, would actually get serious about shedding debt and making government live within its means, then the "deficits" would be eliminated almost immediately. One could argue about earmarks, percentage of debt to GDP, money accounted for in the "out" years, lack of double entry bookkeeping and GAAP standards - but the truth is - WE, the PEOPLE, don't understand the debt. (I've studied it in-depthly for the last six years)

Since President Obama was inaugurated, the national debt has increased over $3 TRILLION. This is a combination of excess government spending, not enough income plus the interest payments that are off-budget. This is the same amount of increase in 18 months that it increased in the entire 8 years of GWB.

The problem, again, is not Republican or Democrat. It's an AMERICAN problem. Neither party wants to admit their fault. Both parties want to blame the other guy. Personally, I blame Congress because they are the ones that are constitutionally mandated to have the power of the purse. All revenue bills originate in the U.S. House of Representatives. And, my friend, they have all let us down.

We, the People of the United States of America (including those living abroad) deserve better!

- Jeffrey S. Williams

  Founder, National Debtbusters

Japan sets targets to rein in national debt

The following appeared on the BBC News website on June 27, 2010.


Japan has set targets to rein in its national debt, the biggest in the industrialised world.


New Prime Minister Naoto Kan has made fiscal reform a top priority, saying that without it the country could face the risk of a Greece-style crisis.


However, the government has given no specific ideas of how it will reach its long-term goal of balancing its budget.


Japan also raised its growth forecast for the year to March to 2.6%, compared with an earlier 1.4% estimate.


That would be the first time the country's GDP had expanded by more than 2% since 2006.

Growth in the year to March 2012 is predicted to be 2%.

"Thanks to the government's stimulus packages, strengthening in business profitability and improvements in employment and household income are spreading to an increase in private demand," the Cabinet Office said.

"If this cycle continues, Japan's economy is expected to go on a track towards an autonomous recovery."

However, it warned that deflation was still a problem - with prices not expected to to stop falling until at least next year.

Confidence

Japan has been borrowing money for two decades, trying to bring its economy out of stagnation.

But although its debt is now estimated at about twice the size of its GDP, some economists believe the fiscal situation is not as bad as it appears.

This is largely because Japan has a trade surplus, and it is still able to borrow money at some of the lowest interest rates in the world.

But the government has acknowledged that if Japan has to borrow more from abroad, the higher interest rates demanded could tip the country into the abyss.

"We must prevent a situation like Greece, where Japan loses the confidence of the bond markets, pushing interest rates higher and leading its finances into a state of collapse," it said in its debt-tackling plan.

The plan states it will bring the budget back into surplus by the end of the decade.

To achieve it, the government has put a cap on the amount of money it spends and borrows.

Raising consumption tax is also under consideration - but probably not for several years.

The BBC's Roland Buerk in Tokyo said that it was Japan's ageing population that most threatened the country's long term future.

"Much of the government's debt is held by the Japanese themselves, but as workers become pensioners they may start spending their nest eggs," he said.

Important Message About Your Federal Income Taxes

Grover Norquist

President, Americans for Tax Reform

April 15, 2010

Dear Friend,

 

Over the next several hours, millions of Americans will pack into the local post office or flood the IRS website to file last minute tax returns. Perhaps you are one of them. 

 

No other day throughout the year is a starker reminder of the financial abuses you and I suffer everyday at the hands of a bloated federal government …

 

…And it’s about to get a whole lot worse!

 

From business-crippling “cap-and-trade” to the recent government health care takeover –President Obama and his liberal friends in Congress are always working overtime to discover new ways to tax us. 

 

Despite his campaign promise to not raise taxes on families making less than $250,000, the Obama Administration’s newest scheme is a national “value-added tax” (VAT).  

 

A “popular” method of tax collection in Europe, the VAT tax is a national sales tax imposed on goods ranging from food to medicine. 

 

Certainly families making less than $250,000 use these goods!

 

My friend, I have a plan to stop President Obama’s tax-and-spend schemes. But I need your help. 

 

First, we must do what Americans for Tax Reform has always done: identify and publicize common-sense citizen legislators on the federal and state level that will stand up for taxpayers, small government and the Constitution.

 

The way we do that is through our much-vaunted Taxpayer Protection Pledge. 

Candidates who sign the Pledge promise not to raise our taxes by even a single dime.

 

And we hold those who break the Pledge accountable. 

 

The second plank of ATR’s efforts is the “Flat Tax.” Unlike the current “progressive” system that punishes success and rewards failure, the Flat Tax is a low rate consumption tax…

 

…That means that after a large personal exemption a dollar earned by a businessman in New York or a janitor in California is taxed at the same low rate!

 

Economists across the political spectrum agree this system greatly decreases the complexity of the current tax-code, reduces the individual tax burden (especially on savings), and gives every American the same simple tax rules with one low tax rate.

 

Ending the “progressive” tax and replacing liberal Washington with fiscally responsible citizen-legislators won’t be easy or done overnight. 

 

That’s why I need to ask a very important favor of you today. 

 

My friend, won’t you aid our efforts with your immediate, generous gift of $500, $250, $100, $50, $35 or whatever amount you can sendto Americans for Tax Reform today?

 

Together, we can succeed. 

 

Sincerely,

 

 

Grover Norquist

President

 

P.S.     In the age of Obama, Americans for Tax Reform’s efforts to change the tax code and support taxpayer-friendly citizen legislators couldn’t be more vital. Please follow this link to give the most generous gift you can to ATR right away. Thanks in advance

Debt Dangers - When Warren Buffett looks safer than Uncle Sam

Chicago Tribune
March 29, 2010

For many decades, U.S. government securities have been the epitome of safe, dull investments. If you wanted to be absolutely positive you'd get your money back and then some, Treasury bills were the way to go. Right now, lots of Americans who put their money into big mortgages or stocks a decade ago wish they had gone the more mundane route.

But it's mundane no more. With federal budget deficits running wild, investors are growing uneasy at the idea of lending money to an institution that seems unable to stop spending beyond its means. Last month, something extraordinary happened: Two-year bonds offered by Berkshire Hathaway Inc. commanded lower yields than those offered by the U.S. government. As Bloomberg.com put it, "The bond market is saying that it's safer to lend to Warren Buffett than Barack Obama."

That may sound common-sensical — Buffett has experience at meeting payrolls, while Obama does not — but it's actually a surprising perception. Berkshire Hathaway, after all, conceivably could make so many mistakes that it runs out of money and closes down. But the U.S. government is not about to run out of money, even if it keeps overspending.

Why not? First, it can appropriate more of its citizens' earnings through the tax system. Second, and more important, it can print money to pay its bills. Warren Buffett doesn't have those options.

So it's hard to see why investors would be leery. Well, actually, it's not so hard: The federal government is digging itself deeper into debt every month and intends to keep doing so indefinitely.

The nonpartisan Congressional Budget Office offers a prognosis: "Under the president's budget, debt held by the public would grow from $7.5 trillion (53 percent of GDP) at the end of 2009 to $20.3 trillion (90 percent of GDP) at the end of 2020." Interest payments would quadruple.

The long-term problem here is not that the government eventually would default on its obligations. The danger is that it would create money to make those debts payable, a course that would lead to much higher inflation. Then, yields on even impeccable corporate bonds would climb with those of T-bills.

The economy would also suffer as businesses and households scrambled to cope with the disruptive effects of soaring prices. It would suffer again if and when the government decided to curb inflation by driving up interest rates — a step that virtually guarantees a sharp downturn.

Frightened investors may be wrong to think they're less likely to get their money back from the government than from Buffett's Berkshire.

But they're not wrong to be frightened.

Boehner says federal debt will equal GDP in two years

"Our national debt ... is on track to exceed the size of our entire economy ... in just two more years."

John Boehner on Wednesday, March 24th, 2010 in an op-ed in the Des Moines Register

St. Petersburg Times PoliFact
March 26, 2010


Ever since Barack Obama became president and began advocating such big-dollar federal programs as an economic stimulus and health care reform, Republicans have gained increasing political traction with warnings to voters about the growing national debt.

On March 24, 2010, House Minority Leader John Boehner, R-Ohio, published an op-ed in the Des Moines Register that was timed to coincide with a March 25 visit by Obama to Iowa City, Iowa. Obama visited Iowa City to tout the health care bill two days after signing it into law.

Boehner's column -- titled, "Why Republicans will fight to repeal health-care takeover" -- was a broadside against the newly signed bill, featuring a wide range of statistics. In it, he asserted that the health care bill "is a recipe for further fiscal disaster at a time when our national debt ($12.7 trillion today) is on track to exceed the size of our entire economy (about $15 trillion) in just two more years."

That struck us as a huge amount, so we decided to take a closer look.

First, we'll offer a reminder that the debt is different from a deficit. A deficit refers to the amount by which expenses exceed revenues in a single year. The debt -- which is what Boehner was referring to -- refers to the cumulative total of past deficits, minus any intervening surpluses.

To sort out whether Boehner's numbers are right, we turned to the extensive historical tables in the president's fiscal year 2011 budget proposal.

According to these figures, which come from the Office of Management and Budget, the gross federal debt by the end of fiscal year 2010 is projected to be almost $13.8 trillion. That's actually a bit more than Boehner had suggested.

Two years later -- by the end of fiscal year 2012 -- the debt is projected to rise to $16.3 trillion, also higher than Boehner had indicated.

But Boehner is correct that, measured by the share of gross domestic product, gross federal debt will reach a significant milestone in two years. By 2012, gross federal debt is projected to be 100.8 percent of gross domestic product, up from 99.0 percent for fiscal year 2011.

These numbers, we'll add, have been growing for decades, roughly tripling since Jimmy Carter left the presidency. Under Ronald Reagan, debt as a percentage of GDP grew from 33.4 percent to 51.9 percent, and under George H.W. Bush, it grew from 51.9 percent to 64.1 percent. It declined under Bill Clinton, from 64.1 percent to 57.3 percent, before rising from 57.3 percent to 69.2 percent under George W. Bush. It's expected to soar during Obama's first four years from 69.2 percent to 100.8 percent.

It's worth noting that there is an alternative measure of debt known as "public debt," which does not include money in the Social Security trust fund or other amounts that the government owes itself. Measured this way, the debt-to-GDP comparisons are much smaller. By the end of 2010, public debt is projected to be 60.3 percent of GDP, and by the end of 2012, it's projected to be 66.6 percent.

Some economists prefer to use public debt rather than gross federal debt, but one measure "isn’t more 'right' than the other – they are just looking at different things," said Marc Goldwein, policy director for the Committee for a Responsible Federal Budget, a middle-of-the-road budget-hawk group. "Boehner may be cherry-picking, but I don’t think he’s misrepresenting in any way."

It's also worth noting that these numbers are only estimates. They could change over the course of the next two years, depending on economic conditions and policy choices. Still, we consider Boehner's statistics valid. While he underestimates the size of the projected debt in 2010 and 2012, his assertion that "our national debt ... is on track to exceed the size of our entire economy ... in just two more years" is on target, according to the president's own Office of Management and Budget. So we rate his statement True.

Newest National Debt Statistics Now Posted - March 2010 - Health Care Vote Edition

Here are the newest national debt statistics courtesy of www.treasurydirect.gov on the eve of the "historic" health care vote.  Statistics are effective March 18, 2010.

Debt Held by the Public

$8,174,187,796,569.78

Intragovernmental Holdings (including Social Security debt)

$4,487,108,259,737.47

Total size of National Debt (on 3/18/2010)

$12,661,296,056,307.25

Interest paid on the National Debt - February 2010

$16,893,440,780.68

Interest paid on the National Debt - Fiscal Year 2010 (to-date)

$181,141,669,146.21

Interest paid on the National Debt - Fiscal Year 2009

$383,071,060,815.42

Gifts to reduce the public debt:

January 2010 - $296,586.71

Fiscal Year 2010 (to-date) - $1,252,743.41

Fiscal Year 2009 - $3,063,057.05

Increase in the National Debt in the last 365 days:

$1,627,070,961,916.22

Increase in the National Debt in the 422 days of the Obama Administration

$2,034,419,007,394.17

($4,820,898,121.79/daily increase)

Social Security to start cashing Uncle Sam's IOUs

By STEPHEN OHLEMACHER, Associated Press Writer 

March 14, 2009

PARKERSBURG, W.Va. – The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

It's time to start cashing them in.

For more than two decades, Social Security collected more money inpayroll taxes than it paid out in benefits — billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.

Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn't be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.

Social Security's shortfall will not affect current benefits. As long as the IOUs last, benefits will keep flowing. But experts say it is a warning sign that the program's finances are deteriorating. Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there's concern that the looming crisis will lead to reduced benefits.

"This is not just a wake-up call, this is it. We're here," said Mary Johnson, a policy analyst with The Senior Citizens League, an advocacy group. "We are not going to be able to put it off any more."

For more than two decades, regardless of which political party was in power, Congress has been accused of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit.

Remember Al Gore's "lockbox," the one he was going to use to protect Social Security? The former vice president talked about it so much during the 2000 presidential campaign that he was parodied on "Saturday Night Live."

Gore lost the election and never got his lockbox. But to illustrate the government's commitment to repaying Social Security, the Treasury Department has been issuing special bonds that earn interest for the retirement program. The bonds are unique because they are actually printed on paper, while other government bondsexist only in electronic form.

They are stored in a three-ring binder, locked in the bottom drawer of a white metal filing cabinet in the Parkersburg offices of Bureau of Public Debt. The agency, which is part of the Treasury Department, opened offices in Parkersburg in the 1950s as part of a plan to locate important government functions away from Washington, D.C., in case of an attack during the Cold War.

One bond is worth a little more than $15.1 billion and another is valued at just under $10.7 billion. In all, the agency has about $2.5 trillion in bonds, all backed by the full faith and credit of the U.S. government. But don't bother trying to steal them; they're nonnegotiable, which means they are worthless on the open market.

More than 52 million people receive old age or disability benefits from Social Security. The average benefit for retirees is a little under $1,200 a month. Disabled workers get an average of $1,100 a month.

Social Security is financed by payroll taxes — employers and employees must each pay a 6.2 percent tax on workers' earnings up to $106,800. Retirees can start getting early, reduced benefits at age 62. They get full benefits if they wait until they turn 66. Those born after 1960 will have to wait until they turn 67.

Social Security's financial problems have been looming for years as the nation's 78 million baby boomersapproached retirement age. The oldest are already there. As that huge group of people starts collecting benefits — and stops paying payroll taxes — Social Security's trust funds will shrink, running out of money by 2037, according to the latest projection from the trustees who oversee the program.

The recession is making things worse, at least in the short term. Tax receipts are down from the loss of more than 8 million jobs, and applications for early retirement benefits have spiked from older workers who were laid off and forced to retire.

Stephen C. Goss, chief actuary for the Social Security Administration, says the crisis has been years in the making. "If this helps get people to look more seriously at that in the nearer term, that's probably a good thing. But it's only really a punctuation mark on the fact that we have longer-term financial issues that need to be addressed."

In the short term, the nonpartisan Congressional Budget Office projects that Social Security will continue to pay out more in benefits than it collects in taxes for the next three years. It is projected to post small surpluses of $6 billion each in 2014 and 2015, before returning to indefinite deficits in 2016.

For the budget year that ends in September, Social Security is projected to collect $677 billion in taxes and spend $706 billion on benefits and expenses.

Social Security will also collect about $120 billion in interest on the trust funds, according to the CBO projections, meaning its overall balance sheet will continue to grow. The interest, however, is paid by the government, adding even more to the budget deficit.

While Congress must shore up the program, action is unlikely this year, said Rep. Earl Pomeroy, D-N.D., who just took over last week as chairman of the House subcommittee that oversees Social Security.

"The issues required to address the long-term solvency needs of Social Security can be done in a careful, thoughtful and orderly way and they don't need to be done in the next few months," Pomeroy said.

The national debt — the amount of money the government owes its creditors — is about $12.5 trillion, or nearly $42,000 for every man, woman and child in the country. About $8 trillion has been borrowed in publicdebt markets, much of it from foreign creditors. The rest came from various government trust funds, including retirement funds for civil servants and the military. About $2.5 trillion is owed to Social Security.

Good luck to the politician who reneges on that debt, said Barbara Kennelly, a former Democratic congresswoman from Connecticut who is now president of the National Committee to Preserve Social Security and Medicare.

"Those bonds are protected by the full faith and credit of the United States of America," Kennelly said. "They're as solid as what we owe China and Japan."

Newest National Debt Statistics Now Posted - Feb 2010

It's been awhile since I last posted an update.  Here are the newest U.S. National Debt statistics effective Feb. 11, 2010 courtesy of www.treasurydirect.gov

Debt Held By The Public:
$7,848,015,306,528.53

Intragovernmental Holdings:
$4,501,309,157,755.75

Total Debt:
$12,349,324,464,284.28

Interest Payments:
January 2010:
$18,856,851,343.86

Fiscal Year 2010 (to-date):
$164,248,228,365.53

Fiscal Year 2009 (total):
$383,071,060,815.42

Gifts to reduce the public debt:
December 2009: $134,182
Fiscal Year 2010 (to-date): $956,156.70
Fiscal Year 2009 (total): $3,063,057.05

Debt increase in the last 365 days:
$1,636,200,248,712.08

Debt increase in the first 388 days of the Obama administration:
$1,722,447,415,371.20
[$4,439,297,462.30/day]

Courtesy of St. Petersburg Times PolitiFact - www.politifact.com

The Truth-O-Meter Says:

"The amount of debt is on pace to double in five years and triple in 10. The federal debt is now over $100,000 per household."

Bob McDonnell on Wednesday, January 27th, 2010 in the Republican response to the State of the Union

National debt on pace to triple in 10 years, now more than $100k per household, GOP claims

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Recently elected Virginia Gov. Bob McDonnell took up the flag for Republicans in response to President Barack Obama's State of the Union address on Jan. 27, 2010.

That meant talking about spending, deficits and debt.

"In the past year, more than 3 million people have lost their jobs, and yet the Democratic Congress continues deficit spending, adding to the bureaucracy, and increasing the national debt on our children and our grandchildren," McDonnell said in a speech from the floor of the Virginia House of Delegates. "The amount of debt is on pace to double in five years and triple in 10. The federal debt is now over $100,000 per household. This is simply unsustainable."

We wanted to check two things: Whether the debt is growing as fast as McDonnell says, and whether it now constitutes $100,000 per household.

First things first -- a quick but critical lesson on the federal debt. The debt clock you're use to seeing, the one that's ticking past $12.3 trillion these days, actually is the summation of two types of debt. The first part is the money the government borrowed to pay for things -- wars, roads, whatever. The second is debt held by government trust funds and government accounts that are internal transactions (government passing money from one fund to another). In these cases, there is no effect on the credit markets. (Read the Treasury Department's Q&A on debt here.)

The Congressional Budget Office, a nonpartisan arm of Congress, says the first form of debt is a more meaningful measure. It's the combination of both types of debt, however, that gets most noticed, surely because it's bigger but also because it's what the debt ceiling is based on.

McDonnell's claim that the debt is on pace to double in five years and triple in 10 is not a new talking point for Republicans. Judd Gregg (the Republican senator from New Hampshire who was almost Obama's commerce secretary) said the same thing about Obama's proposed 2010 budget last March.

To check Gregg, we relied on a Congressional Budget Office analysis from March 20, 2009. The CBO projected that the debt held by the public (the first part of the total debt) would rise from $5.8 trillion at the end of fiscal year 2008 -- which is Sept. 30, 2008 -- to $11.8 trillion by the end of fiscal year 2013; and to $17.3 trillion in 2019 under Obama's proposed FY 2010 budget. By that count, Gregg's claim of doubling the debt in five years, tripling it in 10 years, is correct.

But in Gregg's case we found it a little unfair to tie some of the debt to Obama and not President George W. Bush. We rated Gregg's claim Mostly True.

Now on to McDonnell.

Just hours ahead of McDonnell's response, the CBO released updated baseline debt projections that shrink the amount of debt predicted over the next 10 years. The CBO put the debt held by the public at the end of fiscal year 2008 at $5.8 trillion, $7.5 trillion at the end of fiscal year 2009, and estimates the debt will increase to $11.6 trillion by the end of fiscal year 2014 and to $14.3 trillion by the end of fiscal year 2019. Again, this is just the first part of the debt calculation.

That's a decrease from the projections the CBO put out in response to Obama's 2010 budget. In checking this claim, like when considering Gregg's claim, the truth depends on where you start counting the debt.

If you set your baseline as Sept. 30, 2008, the national debt is on pace to nearly triple by Sept. 30, 2019, as McDonnell suggests. If you recalculate for Sept. 30, 2009, the national debt doubles, not triples in 10 years.

Now, for argument's sake, we wanted to run the same calculation for the entire gross federal debt. (You will see why this matters in a second.) According to the CBO, the gross federal debt ended 2009 at $11.9 trillion, will hit $16.7 trillion by the end of 2014 and $20.6 trillion by the end of 2019. That's short of McDonnell's marks as well. The percentages don't improve much even if you roll back to 2008 -- we're talking again about doubling the debt after 10 years, not tripling.

So unlike comparing the debt held by the public, McDonnell's numbers are off whether you start counting Sept. 30, 2008, or Sept. 30, 2009. White House debt projections from August 2009 are a slightly worse, but not enough to make a change when considering McDonnell's claim.

As we try to digest all of that, let's turn to the second part of McDonnell's claim: "The federal debt is already over $100,000 per household."

The Census Bureau estimated in 2007 that there were nearly 116 million U.S. households. The current debt held by the public -- the money the government has borrowed -- is $7.8 trillion, according to the U.S. Department of the Treasury. The current gross debt is $12.3 trillion.

Presto, chango, carry the one, move the decimal point ... and you get two different debt per household figures.

The household share of the debt owed by the public is about $67,000. The household share of the gross federal debt is slightly more than $106,000.

McDonnell's press secretary, Stacey Johnson, did not return two phone calls or an e-mail asking for clarification on what debt figures the governor was using to make his calculations.

Why does it matter?

If he's using the gross debt figure -- the big one -- McDonnell is right about the per household number and wrong about the doubling and tripling.

If he's using the smaller debt held by the public number, he has a case to make about growth of the debt, but is wrong when it comes to the per household share.

Or he's mixing one form of debt to make one point, and another to make a second.

In his State of the Union response, McDonnell tried using both the macro and the micro to drive home a point that spending led by the Democrats in the White House and Congress is out of control. His claim that national debt is on pace to double in five years and triple in 10 isn't wildly off, but it ignores the fact that some of the responsibility falls on Bush's shoulders.

On his second claim, that the per household share of the national debt is more than $100,000, that's true if you measure the gross federal debt and false if you only count the money the government actually borrowed from somebody else. On the whole, we rate McDonnell's statement Half True.

Democrats Propose $1.9 Trillion Debt Limit Increase

by Shannon Bell
www.rightpundits.com

Last November Congress raised the debt limit for the United States bringing our National Debt to a whopping $12.3 Trillion dollars. Now, just two months later, democrats propose raising the debt limit $1.9 Trillion bringing the total debt incurred by the country to $14.3 trillion dollars. The move is being urged by the White House, of course, and will almost certainly pass.


Like every other piece of legislation making its way through congress right now, democrats are almost solely responsible, for good or ill. Democrats proposing $1.9 Trillion increase in the debt limit is ill timed legislation to say the least. They own it, and they know it. Considering the fact that racking up debt is one of the factors that led to the Scott Brown victory inMassachusetts.

A White House statement said that increasing the debt limit, “is critically important to make sure that financing of federalgovernment operations can continue without interruption and that the creditworthiness of the United States is not called into question.” I’m thinking that perhaps the creditworthiness of the United States has already been called into question by many. China for one, Russia for another.

The democrat proposal to raise the debt limit is just a quick fix to a much larger and growing problem. These clowns have borrowed and printed so much money that it will almost certainly never be paid off. The purpose of raising the debt limit is to be able to continue government programs which for the most part are entitlement programs which we went into debt to pay for in the first place. It’s like taking out a loan to pay the minimum on your credit card bill. It simply makes no fiscal sense.

Government itself has become a beast that needs to be fed constantly. Its food is money, and it never gets enough. The beast will constantly eat, the beast will never shrink, it will always increase its tolerance for more. And then it will meet and exceed that and continue wanting more. Never stopping until it explodes, gorging itself into oblivion.

Conservatism can tame the beast, conservatism can kill the beast. Democrats proposing $1.9 Trillion debt limit increase into a massive $14.3 Trillion debt is just another tool to be used by conservative members of congress, politicians, candidates and pundits to insure that the destruction of the beast which started on Tuesday continues right through November of this year.

Alexander Opposes Increase Of National Debt Limit

posted on www.chattanoogan.com January 28, 2010


Senator Lamar Alexander said he was opposed to increasing the nation's debt limit on Thursday. The legislation would increase the nation’s debt limit by $1.9 trillion – from $12.4 trillion to $14.3 trillion:

He said, “It took this country 230 years to reach $10 trillion in debt. Now, in just 15 months we’ve added more than $2 trillion more. The president was right last night when he said we should not leave Americans with a ‘mountain of debt.’ To hold Congress to that challenge, he should veto this debt increase, which is larger than the size of the entire federal budget in 1999. If this increase in the national debt becomes law, it will leave our children and grandchildren a country they cannot afford and a government they cannot control. Until Congress and the president take steps to bring this alarming debt under control, we should not increase the debt limit.”