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Posted at 11:45 PM ET, 01/26/2011

It's official: The debt is ballooning. Now can we think clearly?

By Stephen Stromberg

The Congressional Budget Office reports that the budget deficit this year will be the highest ever -- $1.5 trillion -- and that the national debt will equal 77 percent of Gross Domestic Product by 2021. And the Committee for a Responsible Federal Budget reports that the CBO's long-term estimates are, in fact, extremely optimistic.

Buried in the committee's analysis was this figure: Simply servicing the debt resulting from the $858-billion tax cut deal that President Obama signed last December will cost about $50 billion a year through 2021. Just the interest payments.

That tax cut agreement fueled the president's recent political comeback. And why not: Everyone got to spend money the way they like. Republicans got tax cuts. Democrats got unemployment insurance. Everyone looked less partisan. And Obama got credit for striking the bargain. Even better: Since the economy is still fragile, there continues to be an appealing logic to the policy. Raising taxes and trimming back unemployment insurance could have derailed confidence in the recovery.

But let's also be honest about the costs of that spending -- about the size of the tradeoffs we are making right now regarding our future national wealth. It may have been worth it this time. But keep that $50 billion in mind the next time Republicans defend unaffordable tax cuts, or the next time they mock those who favor even modest defense cuts, or the next time Democrats and Republicans claim to care about fiscal discipline but allow entitlement spending to grow far faster than inflation every year. Even the mere time we waste refusing to tackle massive projected entitlement costs makes the eventual bill higher -- like that $50 billion debt service figure, it's the sort of thing you don't always remember. When the recovery is steadier, will any of those really be a tradeoff America should be making?

By Stephen Stromberg  | January 26, 2011; 11:45 PM ET
Categories:  Stromberg  | Tags:  Stephen Stromberg  
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Comments

The silence from the hypocrites called the tea baggers is deafening

Posted by: HumanSimpleton | January 27, 2011 12:11 AM | Report abuse

Meanwhile, in his SOTU, Obama calls for dramatic increases in spending on boondoggles like high-speed rail, while proposing no cuts in Social Security and Medicare. All this on top of the highest deficits and fastest increase in federal debt ever. Sputnik moment, anyone?

Posted by: dminnich312 | January 27, 2011 12:24 AM | Report abuse

Unfortunately, the last round of tax cuts (extending the Bush era tax cuts, etc) cost almost 4 trillion we then have to borrow, plus a virtual permanent extension of the Bush era tax cuts. Frankly, we are looking at a certain financial crisis when US Treasury bonds are downgraded, and bond vultures start selling short. While President Obama (and both of my state's Senators!) endorsed the bill as protecting the vulnerable, a fiscal crisis will harm everyone more. It is almost like all those characters in Washington can't comprehend collapse, which is inevitable on the present financial course the US is on:(

Posted by: dobermantmacleod | January 27, 2011 12:27 AM | Report abuse

cut medicare and defense....chop them way down...

Posted by: Roblit1 | January 27, 2011 12:33 AM | Report abuse

Point taken. But a small dose of intellectual honesty would be helpful. Refraining from raising taxes is not a "tax cut". Reducing the rate of spending increases is not a spending cut. If we are truly going to tackle the federal deficit, then most citizens are going to have to "man up" and recognize that we must all sacrifice some government largess that we presently enjoy and take for granted. Politicians don't have enough gumption to tell us this, but we should be smart enough to know it anyhow.

Posted by: bubba31138 | January 27, 2011 12:39 AM | Report abuse

Social Security and Medicare need to be cut - but that move will have to come from the president; the congressional republicans aren't going to make the same mistake that they did in 1995. Defense needs to be cut - no more "world's policeman". Let the Bush tax cuts expire, as they should have been.

Posted by: dminnich312 | January 27, 2011 12:55 AM | Report abuse

unaffordable tax cuts?... you mean keeping them the same?

when is a tax cut unaffordable?

when is spending unaffordable?

pure failure of basic logic here.

Posted by: docwhocuts | January 27, 2011 12:57 AM | Report abuse

Yearly means filing for social security would net a ton. And if we don't disburse SS$ to those without the slightest need for it, who gets hurt?

Posted by: _P2R_ | January 27, 2011 12:58 AM | Report abuse

Okay look, keep taxes at a higher rate and the deficit goes down to 1.2 trillion... wow, what a huge difference... Don't you see it is not taxation that causes the difference here. Back when we had a Surplus under Clinton it was not the higher taxes that CAUSED the surplus, it was that we had had 6 years of controlled spending and standard economic growth. If you look at Government spending ( all Government Spending ) it was 6.1 trillion last year, put another way it could have paid every family in the US $55,000.00, put another way, every family in the US spent $55,000.00 on Government.

I do not care if you are Republican, Democrat, Tea Bagger or Liberal, there is a simple fact that must be understood, Government has increased faster then GDP and we can not afford the Government growth that we have had. Based on historic models Government has grown at an average rate of 10% per year for the last century, GDP has grown at 6%. Based on this model even if you 'Balanced' the budget through taxes the next year you would simply have to raise taxes again and continue to do so until the inevitable occurred which is that all GDP was Government spending. People are upset that health care is 16% of GDP...
Government is 44.1% of GDP!!!

Based on history at this point the solution is not taxation, I know that it feels like the 'rich' should suffer, however the truth is that increased taxation of the rich does not produce more wealth, it simple redistributes it, I would much rather create wealth than redistribute it, just my thoughts, I am sure I am wrong and I am just not understanding how taxation will fix everything. In the end we must stop allowing people in Government to 'fix' things through money, it does not seem to be working.

Posted by: Innocentiousxii | January 27, 2011 1:18 AM | Report abuse

I had a few things to add. In case that 77% figure angers anyone, it should be considered a relief relative to our current debt/GDP situation.

Having doubled from around $5 trillion to $10 trillion (~70% 2008 GDP) during the Bush years, our national debt has already increased by nearly $4 trillion during two years of the current administration. This is why the debt ceiling (which, throughout history, has been more like the sky than any kind of ceiling) will likely be raised again at least once this year.

Plainly, our current debt/GDP ratio is already above 98.4% (13.92/14.14 earlier this year). Currently above $14 trillion, the debt has continued to rise as a result of "business as usual" in Washington.

And if anyone cares:

Opinion-wise, I believe we are approaching a point in time where we must no longer look to our government to fix America's problems. We must begin to look to our neighbors, our countrymen, and ourselves in order to correct America's problem. That problem being our government...

...Which might sound great and patriotic, however, in reality, I have little hopes for such an endeavor given the degraded, disconnected, societal cesspool of ignorance and over-indulgence that we're all swimming in.

Moral of the story, I have no idea why anyone supports any politician.

Speaking coarsely, a politician is like a stranger in a rusty van. He may sound like a friend, he may have candy treats; truth is, he just wants to dry Fxxk your ass in the back of that van.

Posted by: Bsheller | January 27, 2011 1:59 AM | Report abuse

It's official??? It's NOW official that the debt is ballooning?? I've just got one question... er... where was all this concern on the debt when GWB ran the national debt up from $5.5T to $10.8T? The silence from the GOP was deafening back then.

Oh yeah... now I remember... the "prosperity" from their policies was going to simply erase it all...

Posted by: mb56 | January 27, 2011 2:04 AM | Report abuse

It's official??? It's NOW official that the debt is ballooning?? I've just got one question... er... where was all this concern on the debt when GWB ran the national debt up from $5.5T to $10.8T? The silence from the GOP was deafening back then.

Oh yeah... now I remember... the "prosperity" from their policies was going to simply erase it all...

Posted by: mb56 | January 27, 2011 2:04 AM | Report abuse

"Based on history at this point the solution is not taxation, I know that it feels like the 'rich' should suffer, however the truth is that increased taxation of the rich does not produce more wealth, it simple redistributes it, I would much rather create wealth than redistribute it,"
=============

Funny.... that's *exactly* what Republicans were saying while they were cutting tax rates in GWB's terms while DOUBLING the national debt. Mean while... Clinton not only balanced the budget, but created a surplus with only a very marginal increase in tax rates.

Posted by: mb56 | January 27, 2011 2:10 AM | Report abuse

"Based on history at this point the solution is not taxation, I know that it feels like the 'rich' should suffer, however the truth is that increased taxation of the rich does not produce more wealth, it simple redistributes it, I would much rather create wealth than redistribute it,"
=============

Funny.... that's *exactly* what Republicans were saying while they were cutting tax rates in GWB's terms while DOUBLING the national debt. Mean while... Clinton not only balanced the budget, but created a surplus with only a very marginal increase in tax rates.

Posted by: mb56 | January 27, 2011 2:10 AM | Report abuse

"Based on history at this point the solution is not taxation, I know that it feels like the 'rich' should suffer, however the truth is that increased taxation of the rich does not produce more wealth, it simple redistributes it, I would much rather create wealth than redistribute it,"
=============

Funny.... that's *exactly* what Republicans were saying while they were cutting tax rates in GWB's terms while DOUBLING the national debt. Mean while... Clinton not only balanced the budget, but created a surplus with only a very marginal increase in tax rates.

Why do some people never learn - even when the historical lessons are plainly evident?

Posted by: mb56 | January 27, 2011 2:12 AM | Report abuse

OK, once again for everyone who hasn't been paying attention: Social Security does NOT contribute one nickel to the deficit. And if the cap is removed, it will reamin solvent indefinitely. So stop treating SocialSecurityAndMedicare as one as the same. If you want to destroy a program that provides security for people in their old age, just be honest and say so.

Posted by: ala6 | January 27, 2011 7:13 AM | Report abuse

I must correct ala6. Social Security DID not contribute one nickel to the deficit before now. With Obama's 31% cut to employee SS taxes, add $127 billion to the deficit to make up for the revenues. He DID say they would be made up from the general revenue, didn't he?

We'll ignore the over $200 billion a year deficit for Medicare/Medicaid. That's how much comes from the general fund.

Posted by: kitchendragon50 | January 27, 2011 8:41 AM | Report abuse

Can we stop blaming either side. Both are to blame. Under Bush the debt skyrocketed. Under Obama the debt skyrocketed. Two yrs ago both sides said that we needed to stop earmarks then after the election forgot that was ever said by either side. If we can get away from the blame then we might be able to start working on the real problem - the debt instead of what seems to be the current problem - who's to blame.

And to anyone who hasn't been in debt the best way is to set aside money to pay it off. So why doesn't the government do that - make a 5% cut on everything and put that to just paying down the existing debt?

Posted by: CMM21 | January 27, 2011 9:11 AM | Report abuse

Make a 5% cut? When your deficit is 40% of total spending, you need a 45% cut to start paying off your debt.

Posted by: kitchendragon50 | January 27, 2011 9:22 AM | Report abuse

mb56 - You are right the GOP was wrong not to stop deficit spending, though you seem to blame tax cuts rather than spending increases as the problem. However, again if you think that taxation would have stopped us from being where we are today you are wrong, go through and 'tax' at the levels of the Clinton years and you still come out with MASSIVE deficits today, again you go down from 1.5 trillion to 1.2 trillion today of expected deficits... My point is that an increased tax burden does nothing without a responsible government that is not spending more than it can possibly bring in. The GOP under Bush spent too much, the Dems Under Bush Spent to much, The repubs and dems under Obama are spending too much, and we are not adult enough to give up sacred cows of spending and instead can't do without any spending cuts. Look, soon Govt Spending as a part of GDP will be 50%, Then 55%, I do not care who you are or what party you belong to that does not make sense. Spending by ALL govt should be about a max of 30% of GDP and ideally 25% or less. Give me one good reason why the GOvt should be half of the total economy?

Posted by: Innocentiousxii | January 27, 2011 9:25 AM | Report abuse

IT APPEARS THAT MORE AND MORE OF THE COLUMNISTS ARE BEGINNING TO REALIZE , THERE IS NO FREE LUNCH AND MAYBE IN TIME WILL GO BACK TO REPORTING THE NEWS INSTEAD OF TRYING TO MANIPULATE OUR THINKING. GOOD JOB!!

Posted by: jackwbarnes1 | January 27, 2011 9:48 AM | Report abuse

The day after SOTU: CBO revises deficit to $1.5 Trillion, CBO announces Social Security running a deficit and will run out of money in 2037, HHS posts more than 500 new waivers for Obamacare, HHS chief actuary says cost-savings from Obamacare false.

Where are the White House reporters?

Posted by: pilsener | January 27, 2011 11:16 AM | Report abuse


If our leaders are not very careful, there is a real danger that, as a nation, we will no longer have the luxury of wantonly waging wars around the world.

Posted by: merhoff | January 27, 2011 11:30 AM | Report abuse

Let's put it in perspective:
You make $60k/yr.
You spend $100k/yr.
You owe $375k.

What should you do? Proportionally, that is the financial shape of our country. How much your employer makes (GDP) is meaningless.

Posted by: kitchendragon50 | January 27, 2011 11:35 AM | Report abuse

It's very simple. We're in as much debt as we are because Congress has been rewarding the people who got them elected with subsidies, pet projects, and tax loopholes for decades. The President is a convenient lightning rod, but no one in Congress is going to commit political suicide by failing to send every Federal dollar back to the home district that he or she can. And we who elect them to do just that are, ultimately, the ones at fault.

Posted by: Capn0ok1 | January 27, 2011 1:00 PM | Report abuse

It's interesting that Stromberg doesn't mention the recent proposal by the House Republican Study Committee to cut $2.5 trillion.

Posted by: tomtildrum | January 27, 2011 1:39 PM | Report abuse

We can always afford tax cuts. What we can't afford is runaway and unconstitutional spending. By simply sticking to the Constitution we could easily cut federal spending by at least 90%.

Posted by: BradG | January 27, 2011 1:59 PM | Report abuse

Why is it that the answer to everything from the left is to steal more and more from higher wage earners? Why do they think they deserve it? Why is the left so happy to take from others but not give themselves? Why is the left so blind to not understand that the truly wealthy such as John Kerry and Bill Gates don't even pay income taxes and are not affected by any of this nonsense?

Posted by: Pilot1 | January 27, 2011 2:02 PM | Report abuse

HumanSimpleton.........The silence from the hypocrites called the tea baggers is deafening
=============================================
I guess the fact that tea party members have been screaming about concerns over the deficit for that last 2 years has escaped your rather thick skull.

Posted by: Bcamp55 | January 27, 2011 3:20 PM | Report abuse

We'll print the money to cover it just like always. And, contrary to what experts predicted, the dollar is riding high.
Sterling Greenwood/AspenFreePress

Posted by: AspenFreePress | January 27, 2011 3:54 PM | Report abuse

It's official??? It's NOW official that the debt is ballooning?? I've just got one Posted by: mb56..............
question... er... where was all this concern on the debt when GWB ran the national debt up from $5.5T to $10.8T? The silence from the GOP was deafening back then.

Oh yeah... now I remember... the "prosperity" from their policies was going to simply erase it all...
-------------------------------------------
Rather than spew the typically emotionally charged, but factually void liberal banal tripe, maybe a quick history lesson is in order.

Maybe the learned, enlightened liberal can point to the legislation which GWB enacted that was responsible for increasing the debt. 1) Education, 2) SS entitlements - each the largest in history and liberal pork crafted by none other than Teddy "super dumbazzz" Kennedy. That was the first term.

Midway through the 2nd term when liberals took over congress is when the real increases started. Let's shift from history to math.

Jan 2001 - Jan 2007 ....... nat'l debt $5.722 trillion increased to $8.673 trillion or 51.57%

Jan 007 to Today.........$8.673 to $14.06 trillion of 62.1%

BTW- in addition to those liberal giveaways passed in an attempt to appease the welfare scum on the left, there was also that 9/11 thingy which every dimocrap member of congress (minus 1) voted to avenge meaning the military, eviscerated under Bill "where's my BJ" Clinton, had to be rebuilt from the ground up.

Hey, maybe you libs can get around to re-writing theses facts of history like you try to do with everything else that makes you look like imbeciles.

Posted by: Bcamp55 | January 27, 2011 4:13 PM | Report abuse

Can we discontinue using Social Security as one of the 'demons' in this unmanageable national debt.

For those of you too young to remember, or never did learn, the Social Security Trust Fund set up by FDR was a singular entity in which all of the contributions were to remain within the Trust and to be used by only the contributors. It was NEVER to be placed in the General Fund.

Now go back in history to the time of LBJ and the Dem Congress and re-read the status of the Trust. There was such a surplus accumulated at that time because life expectancy was only 65 and the 'experts'(and all other 'policy wonks' of the time) determined it could never be used up faster than what was being contributed.

So the Dems and LBJ 'transferred' the money into the General Fund to pay the ongoing costs of the government.

Now these brillant 'financial experts', in concert with a willing Congress and President have placed it in a bankrupt position.

ALL OF THEIR OWN DOING.

It is government usurping their own mandate to abide by the legislation that had been passed in 1935.

IT HAS NEVER BEEN PART OF THE NATIONAL DEBT - only in the minds of the politicians who wish to use it as a 'whipping boy' to maintain chaos in the public.

Government is the problem - government is not the solution. The bigger the government the bigger the problem and these past 40 years is absolute proof and validation of that argument.


Posted by: dharper2 | January 27, 2011 4:21 PM | Report abuse

Start by cuts in defense which is more than all the rest of the world combined.
CLOSE S. Korea (less they want to pay)
CLOSE Japan "
CLOSE Germany "
Get out of Iraq, Pakistan, Afloosistan NOW
All the big bombs are worthless is u don't use them

Posted by: ledit | January 27, 2011 4:43 PM | Report abuse

Irag will cost total 3 TRILLION
add the other two trash can countries and the total will be 10 TRILLION, there is your deficit.
May I ask, would you throw away 10 Trillion for those 3 mud hut countries?
WELL U WILL
There is NO MORE "going to war", JUST send the grunts in to die, use up ammunition and equipment so we keep the Industrial Military Complex fat and happy.

Posted by: ledit | January 27, 2011 4:55 PM | Report abuse

The whole concept of being able to "afford" a tax cut, or "pay" for one, is made up by politicians and ideologues as a rationalization for stealing more money from the tax base.

There is NO such thing as "government money." The money government spends comes out of YOUR pocket. Rather than asking how we can pay for these tax cuts, the question you should ask is how do we, the tax payers, afford more government spending? The answer is simple: Allow the government to take more of your money so that you keep less. If that sounds good to you, you are indeed a committed liberal. (As such you should probably refrain from participating in tax breaks, deductions or any practice that reduces what you have to pay in taxes. After all, if you are for increased government spending, you should be willing to pay more, not less, correct?)

If paying more taxes doesn't sound reasonable to you, then you should seriously consider supporting smaller government and CUTTING GOVERNMENT SPENDING. The longer we wait the more painful it will be. The cliff is in sight.

Posted by: dtech001 | January 27, 2011 5:04 PM | Report abuse

The best advise for anyone who wants to stop the spending is for everyone to vote for someone who has never served in office.

Quit voting for someone because of their party. Both Democates and Republicans are to blame. We need a whole new congress.

Once this happens everyone should shout TERM LIMITS

Posted by: Jason360 | January 28, 2011 6:54 PM | Report abuse

The main thing driving the long term cost of operating our government is out of control health care expenses. And the only solution that will bring our costs down to those of other first world countries is a single payer system, eliminating insane layers of paperwork and parasitic insurance company profit taking. Every single piece of health care economic data show this to be true.

Until the ideology obsessed right wing accepts that 'the market' doesn't work in every case, and that pragmatic mixed economics not loony tunes Laissez Faire capitalism is what made America great, we will continue to spiral downward while they undermine America's future at every turn.

Posted by: rapchat1 | January 29, 2011 8:45 PM | Report abuse

The main thing driving the long term costs of operating our government is out of control health care spending. And the only solution that will bring our costs down to those of other first world countries is a single payer system, eliminating insane layers of paperwork and parasitic insurance company profit taking. Every single piece of health care economic data show this to be true.

Until the ideology obsessed right wing accepts that 'the market' doesn't work in every case, and that pragmatic mixed economics not loony tunes Laissez Faire capitalism is what made America great, we will continue to spiral downward while they undermine America's future at every turn.

Posted by: rapchat1 | January 29, 2011 8:47 PM | Report abuse

Funny, taxes are lower than they have been in modern history - yet the un-american right wing 'I won't pay for the general welfare' nuts continue to whine about even paying that... while the dept spirals out of control. Your parents stepped up and paid what it costs to support one of histories most successful and egalitarian countries, but you act like selfish children when its your turn to be responsible for the countries future.

Posted by: rapchat1 | January 29, 2011 9:05 PM | Report abuse

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