The Long Debt Road

A recent Wall Street Journal/NBC News poll found that 58% of Americans want President Obama and Congress to concentrate on keeping the budget deficit down. Many Americans are getting concerned with the rapid increase in spending.

The following video provides an illustration of how fast the US debt has increased in the past 100+ years. Note that this has been adjusted for inflation.

You may recall legitimate concerns with heavy deficit spending under the Reagan, Bush 41 and Bush 43 administrations. Some things don't change in Washington, other than the speed of projected spending.




In the opinion of Morgan Stanley’s chief economist, Richard Berner, America’s long-awaited fiscal train wreck is now under way.

By “train wreck,” he means out-of-control federal budget deficits that he’s sure will finally drag the economy under.


Depending on policy actions taken now and over the next few years, federal deficits will likely average as much as 6 percent of Gross Domestic Product through 2019, contributing to a jump in debt held by the public to as high as 82 percent of GDP by then — a doubling over the next decade.

Worse, barring aggressive policy actions, deficits and debt will rise even more sharply thereafter as entitlement spending accelerates relative to GDP. Keeping entitlement promises would require unsustainable borrowing, taxes or both, severely testing the credibility of our policies and hurting our long-term ability to finance investment and sustain growth.

And soaring debt will force up real interest rates, reducing capital and productivity and boosting debt service.

Not only will those factors steadily lower our standard of living, Berner concludes, but they will imperil economic and financial stability.

In the next post, we will find out what the non-partisan Congressional Budget Office (CBO) thinks about all of this.