Raising the debt ceiling: What's the big deal?
Majority Leader Steny Hoyer (D-Md.) didn't get what he wanted -- a permanent hike in the national debt ceiling, from $12.1 trillion to $13.6 trillion -- because the more fiscally prudent members of his own party objected. But Hoyer probably will get a two-month $300 billion lift, which is still enough to drive deficit hawks crazy, The Post's Paul Kane wrote today.
What does it matter that the yearly budget deficit and the national debt (which is the sum of all yearly deficits/surpluses since the founding of the republic) spiral heavenward? As a country, we've been around for 233 years, we've had debts, we've had surpluses, we've funded wars and massive social programs and we're still here, right?
Well, yes. We're fine as long as debt remains a small percentage of the nation's economy, as measured by GDP. In short bursts, the country can handle debt way over GDP, such as when it was funding World War II and debt was more than 120 percent of GDP. But it must quickly be paid down before it becomes a drag on the entire economy.
That's where we are now.
Thanks to falling tax receipts and massive government spending this year (specifically, the $787 billion stimulus), this year's budget deficit will spike to 9.9 percent of the U.S. GDP, up from 3.1 percent last year, according to the Congressional Budget Office.
The national debt stands at $12.07 trillion. In real-dollar terms, the third-quarter GDP rose to an annual rate of $14.26 trillion. That means debt stands at 85 percent of GDP. If you just look at debt held by the public, it stands at 54 percent of GDP.
Either way, the numbers are getting increasingly frightening for a number of reasons laid out in this paper from the conservative Heritage Foundation, released Monday.
As I wrote here, Americans are finally starting to get worried about deficits and the debt. I'm guessing it's going to be a factor in next year's midterm elections and I'm guessing it's going to favor Republican candidates.
-- Frank Ahrens
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December 15, 2009; 4:14 PM ET
Categories: The Ticker | Tags: Heritage Foundation, Medicaid, Medicare, Social Security, debt, deficit
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