The US debt is over $14 trillion. The Office of Management and Budget forecasts that, by the end of fiscal year 2012, gross federal debt will total $16.3 trillion.

During the administration of George W Bush the gross public debt increased from $5.7 trillion in January 2001 to $10.7 trillion by December 2008. Under Obama it has increased to $14.2 trillion by February 2011.

The Pew Center reported in April 2011 the cause of a $12.7 trillion shift in the debt situation, from a 2001 CBO forecast of a cumulative $2.3 trillion surplus by 2011 versus the estimated $10.4 trillion public debt we actually face in 2011. The major drivers were:

  • Revenue declines due to the recession, separate from the Bush tax cuts of 2001 and 2003: 28%
  • Defense spending increases: 15%
  • Bush tax cuts of 2001 and 2003: 13%
  • Increases in net interest: 11%
  • Other non-defense spending: 10%
  • Other tax cuts: 8%
  • Obama Stimulus: 6%
  • Medicare Part D: 2%
  • Other reasons: 7%

“On April 14, when asked why Republicans wouldn’t consider tax increases as a way to reduce the deficit, Speaker of the House John Boehner explained: “Washington does not have a revenue problem. Washington has a spending problem.” That same day, Majority Leader Eric Cantor got the same question. “The fact [that] I think most Americans get, Washington does not have a revenue problem. It’s got a spending problem.” Also on the same day, speaking to an annual event put on by Grover Norquist’s Americans for Tax Reform, Orrin Hatch completed the loop. “We don’t have a revenue problem,” said Hatch. “We all know we have a spending problem.””

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Uhh… No. As the Pew Center analysis shows it’s more of a revenue problem!

Maybe Republicans should focus their attention on finding the real Kenyan birth certificate of Obama instead of distorting yet another area of reality.

 

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Of the $14.2 trillion, $9.6 trillion or nearly two-thirds is public debt, which is owed to the people, businesses and foreign governments who bought Treasury bills, notes and bonds. Of the total foreign holdings ($4.49 trillion), China owns $1.1 trillion and Japan owns $900 billion. The U.K. owns $300 billion, while Brazil, the oil exporting countries, Hong Kong, Russia and Canada own between $100-$280 billion each.

$4.6 trillion is owed by the government to itself, and is held as Government Account securities. Most of this is owed to Social Security and other trust funds, which are no longer running surpluses.

Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983. There was a $49 billion deficit last year (excluding interest income) and a $46 billion deficit projected for 2011. Trust fund reserves are projected to be exhausted in 2036.

In 2010 Medicare paid out $524 billion in expenditures. Medicare Part A is expected to pay out more in hospital benefits and other expenditures than it receives in income in all future years. The projected date of Medicare Part A’s exhaustion is 2024.

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The Social Security and Medicare trust funds have been treated as general government revenue while the surplus was building up. Now that the actual funds are necessary for Social Security and Medicare obligations and can not be used as general revenue two things happen. First there’s a hole in general revenue which the surplus was filling and second funds must come from general revenue to pay back the borrowed funds.

NEW tax revenue must meet these obligations as the original trust funds have been spent and incoming FICA is not enough to meet the SS and Medicare obligations.

This is NOT insolvency of SS and Medicare, this is a general tax revenue problem. I don’t think it’s possible to balance things out by cutting benefits alone. Unless they totally default, the needs of retiring boomers will defeat the proposed fixes.

 

Sources:

http://en.wikipedia.org/wiki/United_States_public_debt

http://www.slate.com/id/2291530/

http://www.ssa.gov/oact/trsum/index.html

 

gimlet

gimlet

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