As soon as the money being discussed passes a billion dollars, for most people it might as well be imaginary . . . here’s a bit of perspective:
To put some context on a new estimate that puts this year’s federal deficit at $1.8 trillion, consider this: That amount had never been spent by the federal government in a single year until 2000, let alone borrowed.
That’s right. As the decade began, the US government spent $1.8 trillion in a year for the first time. Now it’s poised to spend that much in excess of its tax revenues.
The Treasury released the latest figures Wednesday, showing spending of about $3 trillion in the past 10 months, and revenues of only $1.74 trillion.
With two months to go in the fiscal calendar, the Obama administration is projecting that the imbalance will end up totaling $1.84 trillion, more than four times last year’s record-high. The monthly deficit for July, also reported this week, came in a bit above what economists had expected.
Now all the talk about replacing the US dollar with some other currency as the international reserve makes rather more sense. The US government is going to be a long, long time paying off all that new debt . . . or repudiating it and triggering a world-wide financial melt-down. Either way, prudent investors will be looking at non-US investments for future attention. This will make it that much harder for the US economy to grow its way out of debt.
It will take a lot of political courage to stay the course, pay down the accumulated debt and avoid going for what the domestic audience will see as the easy option (declaring national bankruptcy). It’s hard to imagine any current American politician with the fortitude to take the hard option (cutting government spending and paying off the debt).
