￼Washington is Still Digging
Voiceover of web video: Washington is spending and spending. We’re now more than $16 trillion in debt,1 larger than the nation’s economy.2 You don’t have to be an economist to see how this is unsustainable and how it’s not creating jobs.
INCREASING DEBT RATIO
The debt to relative to the size of the economy is one of the measures that economists use to gauge the health of a country’s economy (GDP). The current national debt of the U.S. stands at $16.16 trillion, which makes the debt ratio for fiscal year 2012 spike up to 104.8 percent of the size of the U.S. economy.3 This is the highest debt ratio that has been recorded since 1947. Standard and Poor’s (S&P) looks at these debt ratios as a factor that determines the credit rating of emerging and advanced economies. According to S&P, out of these countries, only five have economies with debt ratios that meet or exceed 100 percent of GDP: Japan, Greece, Ireland, Italy and the U.S.4
For fiscal year 2012 (which ended on Sept. 30), the Congressional Budget Office (CBO) estimated that the federal budget deficit totaled $1.1 trillion, marking the fourth year in a row with a deficit of more than $1 trillion.5 This is the fourth-highest budget deficit on record since the end of World War II.6 How is the government planning to address this excessive of spending? On Jan. 2, 2013, a process called sequestration is scheduled to take effect. Sequestration makes spending reductions to get budget levels in line with statutory spending goals.7 The CBO estimated that under current law, including the sequester and the expiration of certain tax provisions, growth in real GDP in calendar year 2013 will be just 0.5 percent.8
How has all of this spending helped the economy? The U.S. unemployment rate has spiked and been slow to fall and is currently measured at 7.8 percent, the same as it was roughly four years ago.9 The broader measure of unemployment, U-6—which includes individuals who are working part-time for economic reasons and individuals who are marginally attached to the workforce—is currently at 14.7 percent, 0.5 percent higher than it was at the beginning of 2009.10 Meanwhile, quarterly economic growth has not measured above 2 percent this year.11
As the old saying goes, if you find yourself in a hole, stop digging. Learn the facts, and find out how together we can hold the president and Congress accountable.
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- U.S. Department of Treasury. The Debt to the Penny and Who Holds It. Accessed October 8, 2012. http://www.treasurydirect.gov/NP/BPDLogin?application=np ↩
- USA Today. U.S. Debt is Now Equal to Economy. January, 9, 2012. http://usatoday30.usatoday.com/news/washington/story/2012-01-08/debt-equals-economy/52460208/1. ↩
- Office of Management and Budget. Historical Table 7.1: Federal Debt at the End of the Year. Accessed October 8, 2012. http://www.whitehouse.gov/omb/budget/Historicals ↩
- The Wall Street Journal. Comparing Debt Ratios. Accessed October 8, 2012. http://online.wsj.com/article/SB10001424052748703789104576272891515344726.html ↩
- Congressional Budget Office. The Federal Budget Deficit Totaled $1.1 Trillion in 2012. October 5, 2012. http://www.cbo.gov/publication/43657 ↩
- The Wall Street Journal. U.S. 2012 Budget Deficit Totals $1.1 Trillion. October 5, 2012. http://online.wsj.com/article/BT- CO-20121005-710929.html ↩
- Congressional Research Service. Budget “Sequestration” and Selected Program Exemptions and Special Rules. August 9, 2012. http://www.fas.org/sgp/crs/misc/R42050.pdf ↩
- Congressional Budget Office. Economic Effects of Reducing the Fiscal Restraint that is Scheduled to Occur in 2013. May 2012. Page 1. http://www.cbo.gov/sites/default/files/cbofiles/attachments/FiscalRestraint_0.pdf ↩
- Bureau of Labor Statistics. Time Series: Unemployment Rate. Accessed October 8, 2012. http://data.bls.gov/timeseries/LNS14000000 ↩
- Bureau of Labor Statistics. Time Series: U-6. Accessed October 8, 2012. http://data.bls.gov/timeseries/LNS13327709 ↩
- Bureau of Economic Analysis. Gross Domestic Product: Second Quarter 2012 (Third Estimate). September 27, 2012. http://www.bea.gov/newsreleases/national/gdp/2012/txt/gdp2q12_3rd.txt ↩