>Instead of talking about the phony deficit cutting business announced with such glee by the White House yesterday, let’s talk about what Nevada Senator Ensign, and his rubber-stamp sidekicks Rep. Porter and Gibbons don’t particularly want to discuss — aside from trolling for pages. The national debt.
Should a person want to start the day on a deliberately depressing note, DB recommends bookmarking PublicDebt a service of your Department of the Treasury. There one can gaze at the astronomical numbers, like 10/11/06 debt held by the public: $4,850,465,400,774.43. Or, the total debt as of yesterday, an impressive $8,544,968,376,000.88.
For the truly masochistic there’s the “Historical Debt Outstanding – Annual 1950 to 2005″ page. Harken back to the year 1980 when the GOP was loudly bemoaning the national debt — then a piddly-by-comparison $930,210,000,000, which was actually at an all time low relative to the Gross Domestic Product. [SW]
The Republican plan to deal with this? The $2.7 trillion budget plan pending in the House of Representatives in May, 2006, raised the debt ceiling to nearly $10 trillion less than 2 months after the Rubber Stamp Congress had already raised the borrowing limit. [WaPo] In fact the Rubber Stampers have raised the debt ceiling four times in five years. [NPR]
What’s the problem with all this? Simply put, Americans paid out approximately $406 billion in interest payments in FY 2006, for which not a single employee was paid, not a single highway or building constructed.
The second question that needs to be raised is can this level of indebtedness be sustained? Two factors should be cause for concern. Demographically the population of the U.S. is aging and this will put budget pressure on programs. In addition, as the debt increases so does the risk premium, or the interest demanded by foreign bankers. [CSM] As of July 2006 Japan held $636.6 billion of our debt, China $332.7, and the United Kingdom another $109.3 billion. “Oil Exporters” hold $103.1 billion, Caribbean Banking Centers $68.9 billion, and South Korea holds $68.4 billion. [UST] How much longer will these countries keep the risk premium relatively low?
The third issue is that the current geopolitical situation with North Korea becomes even more problematic given the heavy investment in treasury securities by Japan and China. However much we may want to make our creditor Japan feel secure in light of the recent North Korean nuclear tests, there’s the added issue of keeping the Chinese central bankers happy while they hold on to the second largest chunk of our treasury securities. How much pressure for sanctions on North Korea can we place on China until that nation demands a higher risk premium in return?
We’ve already made the swing from being the world’s creditor (1970-75) to being the world’s debtor in 2004. [CGDEV] How this will impact our living standards, trade policies, and geopolitical capabilities remains to be seen. In short, there’s more riding on these mid-term elections than Republican sloganeering would suggest.
Senator Baucus (D-MT) sought to amend the debt ceiling bill, H.J.Res 47, to include a provision requiring a study of debt held by foreigners. The amendment failed 44-55. Senator Ensign voted No on the amendment, but with a safe 52-48 on final passage Ensign could be “independent” and vote No on the final bill, right along side Ted Kennedy and Barbara Boxer.
No roll call votes are listed by the Clerk of the House for the period the debt ceiling bill was passed (4/28 to 5/2) in that chamber.