National Debt Will Surpass 100 Percent of GDP By End Of 2011

New figures show the national debt of the United States will surpass the size of the GDP by the end of 2011. This is a huge event, one that should be causing alarms to sound.

National Debt

The current national debt stands at roughly $14.3 trillion dollars. By the end of the year, it will be approaching $15 trillion assuming the debt ceiling is raised. When this occurs, the size of the debt will be bigger than our total economy. The percentage will be between 101 and 102 percent of GDP, an absolutely ghastly number.

The national debt is often described as a problem we continually kick down the road, one that will have to be dealt with by our grandkids. Oh, really? Well, here is the really bad news. The grandkids don’t have to worry about it because the effects of huge debt are hitting now and we need to wake up to them.

90 Percent

The magic number when comparing a countries debt and its GDP is 90 percent. Study after study has shown that when a countries’ debt grows past 90 percent of the GDP of the country, the economy starts to suffer. Why? Well, taxes tend to go up and much more of the government budget is dedicated to paying interest on the debt. Higher taxes slow economic growth and money paid in interest on the debt is siphoned away from things desperately in need of it such as infrastructure. In short, it turns into a downward spiral that crushes even the most affluent and powerful societies. This is exactly what happened to Rome and it appears to be our future as well.

Pain

The question is one of pain. Do we want to suffer through some pain now as we slash spending and raise taxes or do we want to really take it hard when a crisis hits? There is no good answer. Acting now is prudent, but our tepid economy is not exactly stable. Wait longer and we invite even more pain down the road. We aren’t up sh.t creek yet, but we can see the whitewater.

We stand on the edge of economic ruin. We have major elections coming up in 2012. It is time to act. Demand your politicians address this issue and vote for those who are willing to act like grownups and deal with it.

It is now or never.

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