Wayne Post
  • William Compton: Tackling debt still job one

  • Now that the economy is regaining its health, all this talk of sequester is passé, and we can get back to spending as usual, right? Maybe before we do, there might be some other things we should consider.

    • email print
  • Whew! It looks like, except for a few pesky little problems, the recession of 2008 is finally ending. According to a recent article in the Daily Messenger by AP economics writer Christopher Rugaber, even though major analysts are expecting sluggish overall growth, major economy measurements are trending upward:
    - Unemployment remains at 7.6 percent, a positive, because more people are now looking for work.
    - The economy added an average 202,000 jobs per month for the last six months.
    - Average hourly pay has increased by 2.2 percent over the last year.
    - The Fed’s monthly bond purchases (read that as printing more money) have encouraged increased purchases of homes and cars.
    - The Fed is so hopeful, it is (talking about) cutting back or eliminating its bond purchases (currently at $85 billion PER MONTH)
    Now that the economy is regaining its health, all this talk of sequester is passé, and we can get back to spending as usual, right? Maybe before we do, there might be some other things we should consider:
    - Throughout this whole argument about budget cuts and sequester, the national debt has continued to grow, not only in absolute terms (from $15.8 trillion to $16.9 trillion in the last year, but also as a percentage of the gross domestic product from 103.9 percent to 107 percent.
    - The National Debt Ceiling is looming on the horizon as the next major crisis.
    Early in 2013, the Congress suspended the national debt ceiling until May 18, at which time it became operative again, at $16.4 trillion plus the increase in debt during that period, estimated at $400 billion. Right now, the debt ceiling stands at approximately 16.8 trillion. The Treasury has notified Congress that this will probably be adequate until sometime after Labor Day, based on some unusual and one-time revenues received by the government. The Congress will have to deal with the question of whether and how to raise the debt ceiling, or face national default on the existing debt.
    - The cost of debt maintenance to the federal government is starting to edge upward, the yield of a 10-year Treasury Note rising from 2.56 percent to 2.65 percent. If this trend continues as the economy improves and the cost of the debt comes closer to its traditional level of around 5 percent, the cost of a $16.8 trillion debt will be in the neighborhood of $840 billion annually, rather than the current value of $420 billion.
    That additional $420 billion will get added to the debt EVERY YEAR (see “Debt Trends(USDebtClock.org)” updated July 6 by WRC; “NDC July 6; Charles Schwab article May 15).
    -There has been considerable self-congratulation about deficit reduction, which has, in fact occurred. This has resulted in a reduction of the budget deficit since June 30, 2012 of approximately 22.3 percent. However, we are left with a current budget deficit of $1.012 trillion annually, which will be added to the debt as long as it persists.
    Page 2 of 2 - It is my belief that talking about deficit reduction is obfuscation, and that deficit reduction is a pale and wavering objective. What we need to be talking about is deficit elimination, and a beginning of reduction of the debt itself. Until we do that, we will be continuing our national march toward an economic condition which can’t be sustained, and which is sure to result in conditions we are now seeing in some European countries except that in the U.S. it will occur on a much larger scale. Here, there will be no ECM to bail us out.
    We cannot ease up on spending cuts; in fact, they must be extended to the point where there is NO annual budget deficit. Maybe if we move in that direction, we can become once again a nation of people who provide for themselves and live within their means, rather than depending on governmental bureaucracy for everything we need.
    Seeing that these changes are implemented with the minimum impact, and at the same time, protecting and empowering the most vulnerable elements of society, is Job One for the Congress and the president. Congress and the President should put aside the political grandstanding and get about Job One.
    Wouldn’t that be a new beginning?
    William R. Compton lives in Bloomfield.
      • calendar