Debt Management: Is There Any Hope For America’s Debt Problem?

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Wouldn’t it be nice if our politicians in Washington D.C. simply decided that we are not going to spend more money then we bring in?  That would just seem to be common sense.  After all, what do most of those big time debt management seminars teach?  Most of the time they tell families with debt problems that the very first thing that they need to do is to stop spending so much darn money.  Well, with the U.S. government things are just not that simple.  In fact, even the most “crazy” budget proposals floating around Congress right now would not balance the federal budget until 20 years from now.  The truth is that there does not seem to be much hope for America’s debt problem.  In fact, it appears to be inevitable that it will continue to get worse long into the future.


So is there anyone in Congress that is serious about balancing the budget right now?  Well, there are a handful of politicians in Washington that want to address the problem right now, but they are generally labeled as “extremists” by the mainstream media.

Instead, the mainstream media has been focusing on the brutal fight over the small budget cuts that the establishment Republicans are proposing.  CNN, Fox News and MSNBC make it seem as though this is a “life or death” fight, but the reality is that it really isn’t going to make much of a difference no matter who wins.

Right now the Obama administration estimates that the federal budget deficit for fiscal 2011 will be approximately 1.6 trillion dollars.

The Republicans propose to reduce that amount by 3.8%.

The Democrats say that they only want to cut it by 2.1%.

Wow, both parties are really wielding the budget-cutting axe, eh?

The truth is that this situation is a complete and total joke.

Neither party intends to balance the budget this decade.

Just today, U.S. Representative Paul Ryan made headlines with his plan to cut $4 trillion from the federal budget over the next 10 years.

His plan would return federal spending to 2008 levels and it would include deep cuts to both Medicaid and Medicare.

His plan is being called “crazy” and “radical” and already Democrats are swearing that such a plan would never make it through the U.S. Senate.

But you know what?

As “crazy” as Ryan’s plan is, it would not even balance the federal budget until 20 years from now.

You do have to give credit to Ryan for at least addressing Medicaid and Medicare.  Most of our politicians staunchly refuse to even discuss budget cuts to those programs.

And the reality is that going after entitlement programs is political suicide.  Tens of millions of Americans rely on direct payments from the federal government and they are not going to take too kindly to any politician that comes along and wants to take part of their money away.

But something has got to be done.  Things have gotten completely and totally out of control.  Mandatory federal spending is going to surpass total federal revenue for the first time ever in this fiscal year.  That was not supposed to happen until 50 years from now.

International organizations are becoming increasingly alarmed about our debt management problem.  A recently revised IMF policy paper entitled “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” projects that U.S. government debt will rise to about 400 percent of GDP by the year 2050.


So what kind of debt management solutions is the IMF policy paper proposing that the U.S. government implement?

Well, the paper indicates that a “permanent annual fiscal adjustment” that is equivalent to 15 percent of U.S. GDP is what is required.

So how would that be achieved?

Well, the IMF paper proposes that all federal tax rates be raised substantially and that all entitlement payments be slashed by 35% immediately and permanently.

That does not sound fun.

Plus, those measures would likely collapse the economy.

But that is the situation that we are in.

One of the only things keeping the economy from plunging into a major depression right now is wild borrowing and spending by the federal government.

But all of this wild borrowing and spending is making our long-term problems even worse.

Unfortunately, our politicians decided that they would go “all in” on trying to fix our economy now and they are hoping that somehow a solution to our growing long-term financial problems can be worked out later.

This is the same path that we have been going down for the past 30 years.  Our politicians love to talk, but the time for fixing our massive debt problem never seems to arrive.

In fact, the politicians in Washington seem to find endless reasons to spend even more money.

For example, the cost of the first week of attacks on Libya was 600 million dollars.  Now we are involved in three wars that we can’t afford.

Meanwhile, many of the largest corporations in the world give millions of dollars to our politicians but often they do not pay a single penny in corporate taxes to the U.S. Treasury.

The avoidance of taxes has become an art form for large corporations and the ultra-wealthy.  Back in the 1950s, corporate taxes accounted for about 30 percent of all federal revenue.  Today they account for less than 7 percent of all federal revenue.

The truth is that our tax system is unfair, corrupt, deeply broken and needs to be scrapped entirely.

So what is the end result of having a tax system that is busted while U.S. government spending is out of control at the same time?

The end result is a government that is completely drowning in debt.  We have accumulated the largest mountain of debt in the history of the world and we expect our children and our grandchildren to pay it off.

Some legacy, eh?

In a previous article on U.S. government finances, I detailed some absolutely horrifying statistics about U.S. government debt….

*If you divide the national debt up equally among all U.S. households, each one owes a staggering $125,475.18.

*The federal government has borrowed 29,660 more dollars per household since Barack Obama signed the economic stimulus law two years ago.

*During Barack Obama’s first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.

*In the new budget that the Obama administration has proposed, the U.S. government would spend 3.7 trillion dollars in 2012 and by 2021 the U.S. government would be spending a whopping 5.6 trillion dollars per year.

*The U.S. government currently has to borrow approximately 41 cents of every single dollar that it spends.

*The total compensation that the federal government workforce earned last year came to a grand total of approximately 447 billion dollars.

*The U.S. national debt is currently rising by well over 4 billion dollars every single day.

*The U.S. government is borrowing over 2 million more dollars every single minute.

*The U.S. national debt is over 14 times larger than it was just 30 years ago.

*Unfunded liabilities for entitlement programs such as Social Security and Medicare are estimated to be well over $100 trillion, and nobody in the U.S. government seems to have any idea how we are actually even going to come close to meeting all of those obligations.

*If you were alive when Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.  But this year alone the U.S. government is going to go about 1.6 trillion dollars more into debt.

*If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

Yet despite all of these statistics, our politicians still want to put balancing the budget off for another time.

Well, the truth is that time is running out.

At some point, the rest of the world is going to realize that there is no hope of ever getting the U.S. government debt spiral under control again.  They will completely lose faith in the U.S. dollar and in U.S. Treasuries and the global financial system will come crashing down.

Let us hope that day does not arrive too soon, but the recent behavior of our politicians is not doing much to inspire confidence around the globe.  Most of our politicians still act as if they can rack up record breaking budget deficits indefinitely and that there will never be any serious consequences.

Oh, how wrong they are.  A great day of reckoning is coming for the U.S. financial system and it is going to be incredibly painful.

Things did not have to turn out this way, but they did.  So hold on tight and get ready for some bumpy times.

  • pogue

    Obviously, there is only one answer. Someone needs to fall on their sword and cut us back to spending less than we take in. Actually, a whole bunch of someones need to fall on their swords.

    What’s more important-Being in charge of nothing or no longer being in charge of something?

    Obviously, it’s more important to preside over the death of the nation. The worst part is we can’t sue them for their actions, or lack of actions, after they’re out.

    When the time comes, I bet the airliners will be full of parasites leaving the US as our dollar collapses and the country goes into to hyper-depression.

    Were I president, I would force frugality and responsible spending if I had to put an armed soldier at every congressman’s table during the vote. We’re at the edge and they’re going to spend us over it with nary a concern.

  • Xander cross

    I blame the market. Why? Because of greed.

  • nick

    Its called default

  • Albert B. Contreras

    I don,t what the solution would be; as a security officer I have seen lots of federal goverment waste when it comes to lets buying computers , office supplies etc. Everyone of you that reads this would have to say ” OH MY GOSH !!! WHAT THE @#!^*! ”
    This may help ..the suggested video / reading materials. On YouTube or ordering at there website get the Money as Debt Part One and Two. Its excellent material for understanding how present money system got started.
    On amazon dot com; get the book called The Creature from Jekyll Island : A Second Look at the Federal Reserve authored by G. Edward Griffin. Its take on past history events and how the US was effected by that and the establishement of the Federal Reserve as a private bank is a eye opener. Lots of reading and research is required by you the reader buts it well worth the effort. PEACE EVERYONE !!

  • I would also like to hear you talk about the money spent on the military etc. That this money is not included in the federal budget.
    Is there a federal debt and national debt?

  • rick stroz

    I agree with all points of this article excepting one. Social Security is NOT an entitlement program. I along with millions of other Americans paid or pay into this program. In fact due to the 1983 Social Security restructuring, we baby boomers paid for our Social Security in advance. Because the federal government borrowed (read stole) these funds does not make the program an entitlement.

  • I’d believe these politicians’ austerity programs if they started with a 50% or greater pay cut for themselves. Heck, I’d like to see the top tier of our Federal officials follow the example of FDR’s dollar-a-year men and take a token salary of a dollar, returning the rest of their salaries to the Treasury to be used where it’s truly needed.

    No, austerity always has to be for the little guy, while those on the top continue to rake it in and live in high style. The real issue with the Medicare and Medicaid cuts isn’t whether they’re necessary, it’s the indignation that comes from being told “you go die and reduce the surplus population while we sit pretty.”

  • William

    How interesting that when the Smirking Chimp and war criminal Bush ran up huge deficits, the Repukes had NOTHING to say. The highest ever dollar total for “earmarks” came, in fact, when the Repukes controlled both chambers of the US Congress and the WH. WHY did the Repukes pass the Medicare drug coverage when there was no provision to PAY FOR IT? Repukes have ZERO credilibity on the debt, or the deficit. As for debt management, the FED and the US govt will inflate its way out of this crisis. This has happened in country after country. The problem is that this will seriously hurt the living standard of most Americans.

  • Piglet

    “We have accumulated the largest mountain of debt in the history of the world and we expect our children and our grandchildren to pay it off.”

    That the bills won’t come due until our children and grandchildren are in the work force is merely wishful thinking. This is going to blow up much sooner, and it’s going to be right in our own faces.

  • A Dodgy Bloke

    Not quite sure where to start but this will implode well before 2050. Anybody dependent on a government check is going to be in real trouble. Section 8, Food Stamps, Welfare, Medicare, Medicaid, Social Security (There is no trust fund), Disability Payments, for starters those go away. Corperation for Public Broadcasting Gone, money for Student Loans history Head Start gone, I bet everybody reading this has some sort of Government program they use. VA Bennies? Does your kid get free meals in school? Are you or your kids going to school on a Pell Grant? Gone.

    Those “Green Jobs” gone without a Government subsidy (. i.e. a check) all that goes away. Any Government services left will be a nightmare to deal with, understaffed, underpaid with old equipment, it will be worse than nothing because it will suck up valuable recourses giving little if nothing in return.

    Anybody in another country rubbing his or her hands in Glee, let me point something out Americans are the largest consumers of goods in the world. This thing call globalization is built on it we buy cheep crap, we go in debt for cheep crap from the rest of the planet you guys have jobs. When the US goes under who will pick up the slack China (Another 20 years maybe I’m doubtful the population is aging to fast, and Goggle Jasmine Revolution China) Africa, South America? Good Luck with that. Maybe India in 10 years but this will be over before anybody is ready to step into the economic shoes of the US. Military there is that nature and vacuum thing, and who ever fills it will not be nearly as nice as we where.
    When this thing implodes it will be a very long nightmare for everybody.

  • john w

    I think there are parts of the Ryan plan that are unfair but at least he is trying to do something.

    We should start by cutting military spending by 178 billion a year, as suggested by Secretary Gates. Why is congress second guessing the man in charge of the Department of Defense and planning to cut only 78 billion.

    All other federal spending across the board(including congressional salaries) should be cut by a set amount – maybe 15%. Necessity is the mother of invention – we would find ways to cope.

    We should all agree to accept a bit less in social security – what is worse, less of it or none at all? Then any federal official who diverts our retirement money to pay for other programs (which would include most members of congress) should be imprisoned – and be charged rent for their time in prison.

    Health care corporations should be rewarded for helping prevent disease and taxed heavily if the areas they operate in see rises in life-style related diseases. Prevention is far cheaper than treatment. Make fun of Michelle Obama all you want, but if we live in a country of grease and sugar eating couch potatoes, you’ve got to figure that health costs are going to be high. The American health sector is a joke and a scam. We pay the highest health costs in the world (a lot of it with our tax dollars, and not for ourselves but for people who don’t take care of themselves) for the worst results in the developed world.

    When we buy, we should all be buying as many American-made goods as possible to keep the trade deficit down. And instead of buying cheap junk, we should be happy to use the money to pay taxes IF they are going towards rebuilding our crumbling infrastructure (which would also provide at least a small number of reasonably paid jobs.

    We should all be cutting our energy use by 20%. Think of all the little ways you use/waste energy unnecessarily every day. How much of our money do we send overseas every year to feed our addiction? Face it folks, the answer is not finding more oil – the answer is admitting that there is not a never-ending supply.

    We should take action against corporations that are gaming us, hollowing out working America in order to line their pockets, not paying their share of taxes, and expecting reverse socialism everytime they lose money. There should be thousands of people milling about in Bank of America branches, making it impossible for them to conduct business, every day until they change their practices or until they go out of business. We need to stand up to blatant corporate immorality and injustice.

    I would like to see things turn around, but to be honest, I never expect to see social security, medicare, or anything else from the govt. I don’t think China and company will let the US collapse, just decline into second or maybe third world status. But I don’t worry too much about it – I just enjoy the life I have. I am without health insurance and slowly starting to lose my health, but I love my life -visiting friends and family, hiking, biking, fishing,reading,gardening, playing the piano, volunteering – and working at a job that I don’t particularly like but that I don’t obsess about. And I love my life while living comfortably on 15 or 16 thousand dollars a year (that’s about $8.50 an hour folks – and rent comes out of that – I don’t own a house). We are screwed because we have spent so much time groveling at the altar of the dollar and the high life that we have forgotten how to live life and because we have forgotten that when we look out for others, they look out for us.

    You really want to change America? Throw your TV off the nearest cliff and discover life.

  • Guido

    Rick Strohz-
    It is an entitlement. You’re taxed to pay for other people, then feel entitled to the tax money from other people in return. In any case, social security is a joke-everyone knew it wasn’t going to last. When I was a child in the 1980s it was explained to me in school many times by cynical teachers and parents there would be no social security when I grew up. Just look at your own demographics-you’re a baby boomer. How can you expect fewer productive workers to support a majority group of retirees? Social Security is a Ponzi Scheme that can only work if there are more employees than retirees. We’re flipping pyramid upside down and millions more of you will retire every year for the foreseeable future, burdening the few of us who are working with your demands.

    Now here’s the interesting part-It is an interesting fact that in our society most of the available wealth is held by our older people. Why? They’ve had longer to accumulate it. While not everyone is rich in old age, many people in old age have quite a lot of money. I know people who have one and two retirments coming to them who are still working. Some, for example, did a career in the military, then transferred to government service, and now are collecting two retirements. These folks don’t really need social security, do they? But ask them to give it up and they’ll get angry. This is their entitlement!

    As far as I’m concerned, social security is a tax on my income to fund freeloaders, no matter how much they need it. The government set it up with high promises, but we all know they raided the so-called off-limits social security fund for their own BS projects and have to pay benefits out from elsewhere. Social Security is broken. It never should have been set up by the feds, since it is a violation of the federal powers enumerated in the constitution. Interestingly, the concept was borrowed from the Kaiser, who initiated welfare and social programs to ease pressure from dissatisfied workers in Germany and head off socialist forces there.

    I think we’re going to have to defund and kill social security, as well as all federal giveaway programs. We can’t afford them and they’re not really the government’s responsibility. And it’s inherently wrong to steal my money to give to another. I don’t mind if the states make up their own plans, at least they have a better chance of figuring out how to support their own people. It’s within their power, anyway, but the feds have shown they can’t administer anything at this point and shouldn’t be permitted power over anything.

  • Miguel

    A Debt Jubilee is the only way out of this mess at this point. The issue comes in how will assets be divided? The best way is to allows assets to stay where they belong. Your hard work is protected.

    Those that will take issue are entities that have vast wealth and create vast wealth but produce nothing for either. In other words a bank. This is why this approach will never fly.

    These people would rather everyone starve and suffer then lose their positions of wealth. Oh well enjoy life is what I say. Nothing we can do to stop it but hopefully teach our next generation not to fall prey to this system.

  • The hard reality is that everyone will have to sacrifice sooner or later. No one wants to give up their entitlements or programs now. But eventually all non essential programs will be gone want to or not. So we go back to spending what comes in and only on things that we have to like security, law enforcement, education, roads and military. That’s it. The rest will need to come from private industry.

  • Guido

    There’s nothing wrong with that to me. If you read the Constitution, all this extra stuff and all the freebies are violations of the enumerated powers. And the feds have shown they’re not very good at doing anything, anyway. I’ll welcome the end of non-essential programs.

    Go look at to see the list of useless agencies we fund. Shut down the DOE-it was created under Nixon to end our dependence on foreign oil. How’s that working out? Shut down the HUD-they have never built a single house. Shut down the NEA-artists will just have to accept the fact that we’re not going to buy art if we think it sucks. Shut down the other DOE-they’ve done nothing to improve education and standards have only worsened under them. (BTW-did you know the spelling primers our kids used 200 years ago were simple enough for a child to teach himself to read in 30+/- hours?) Shut down the DOC, since there’s no need for the feds to be interfering in the development of foreign and domestic commerce. Shut down the DOL-We don’t need a department concerned with labor issues, including international labor conditions. I’m not sure we really need a DOI, since I don’t know if the government really has any business possessing as much land as it does. What do they own, 2/3 of the West? I would even venture to say we don’t need a DOA-The feds have no business coming up with policies to control food and farming.

    These and many other issues are rightfully the responsibiltiy of the states and these ponderous agencies are merely the legacy of the big government impulses of the 20th century.

    It seems like power is best kept at the lowest level possible where it can be most accountable to the people because, to quote Plato, “He who wears the boot knows best where it pinches.”

  • When all is said and done, it would have been most prudent to let the respective banks, wall street firms, and insurance companies to go belly up. Government will now have to devalue the $ or start with a new currency to get out of this Fed debt mess they have put us in. We are in for a long, long period of minimal growth and reduced government services and/or massive and long term inflation.

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  • Economist


  • Economist

    That’s the answer, btw, to the article title.

  • guido

    According to Peter Schiff, the only way to make this better is to let them all fail and let the successors pick up the pieces. Trying to stave off the failure only prolongs it. Then again, what does he know? He was predicting this all along.

  • Steve


    Q: Is There Any Hope For America’s Debt Problem?

    A: Yes, there is always hope.
    Jubilee (default) is the correct solution.

    It is painful for the creditors, but is the only way to get the taxpayers free from slavery to the idiots at the helm of the US Govt.

    Let’s start bankruptcy proceedings with the notion that the citizens are shareholders.
    We need a 21st century continental congress to radically reform finance(money) and government.

    If we lose the battle of ideas, we are all going to pay dearly with real violence, I fear.

  • Terry

    I do not worry about debt projections 20 or 30 years into the future because the world will help us correct our problems long before then (reality sucks).
    I do not blame capitalism because if it hed been allowed to work we would be rid of jp morgan, gm, et al.
    Shut down SS and let people provide for their own final years (I do not recommend the 401(k) scam). Where did we get the idea that retirement should be a 25 year paid vacation?
    I will not disclose what I think the powers that be deserve, but most people would find it barbaric.
    Gates is an idiot. That said, the DoD needs a haircut along with all other alphabet soup agencies. 15% or 20% is not nearly enough. Most fed agencies should be abruptly ended. The drones who staff these agencies would just have to find something productive to do for a living (I realize that this would be like living a horror movie for most of them).
    The USA should dissolve and the individual states carry on as they see fit. Tough noogies for the holders of treasuries. Most of them will never get their principle back anyway. It was a great party, but the cleanup will be a bitch.
    I suspect that the only way to get from here to there will be to starve the beast. Look at Russia. Since so much of their economy is outside the government system, their government has much less money to harass the people. They concentrate their efforts on stealing from the big fish. When the banksters and politicians go too far and collapes the US economy completely, they will find that they do not have funding to opress the average citizen as much as they do at present. Even if they hide in their elaborate bunkers, how can they be sure their underlings will not realize that the bubble has burst for real and the masters no longer have anything to offer and are therefore no longer needed?

  • Terry

    Saw a little of obummmer spouting his nonsense today. More of the same (sounded a lot like bush, clinton, bush, et al for as long as I can remember. I only somewhat respected reagan. In the end, he was much like all the rest). We will invest in green technology (keep throwing money down that rathole), we will invest in education (if money was the answer that one would hsve been fixed a long time ago).
    Government is bloated at every level. Just look at what they all call severe cuts and notice that the largest, most elaborate buildings seem to be government facilities. Let them keep going until people who actually pay cannot pay any more and let the whole thing grind to a halt. This may take a while because so many of us get some kind of handout.
    I do not see local LEOs doing a house to house sweep to confiscate supplies. I know one and am confident he would want none of that action. After word of such an action started to spread, it would become difficult to take people by suprise and the enterprise would get expensive for the LEOs in terms of human capital.

  • Robert Reisig

    First of all how can I as a private citizen balance my finances. And I do every year.
    Second I feel the Congress should be getting Social Security and our type of Medicare and reasonable retirement packages, not what is going on now. Just do this for starters—- at least talk about it. Then Term Limites are also a must—- this is hardly ever mentioned, especially by those in Congress—- after your limit then go home and get a Job. Thats it —- well not quite. When the President put us in Libia , that was the final straw— he just doesn’t get it and never will. May God help us!!

  • Extreme remedies are very appropriate for extreme diseases. ~Hippocrates, Aphorisms

  • john

    Perhaps this is the motivating factor to the said “New World Order”–create a one world government and there is no more national debt.