Thomas Jefferson once said, “"I place economy among the first and most important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt."
Jefferson would be horrified to learn that America’s national debt has reached a record-breaking level. It now stands at more than $11.4 trillion. That figure represents more than $35,000 per American citizen, and the debt continues to grow at a rapid clip. In fact, since late September of 2007, the average daily increase has been an astonishing $3.92 billion. The interest alone was well over $400 billion in fiscal year 2008. How will America ever be able to pay off this giant deficit?
Many experts believe it’s not even possible. The first step would obviously be to stop adding to the existing debt. There are several reasons why this is highly unlikely. The first is the interest accrued by the debt, which obviously increases with the amount owed. It currently represents one of the largest expenditures within the federal budget and is on track to become the largest, surpassing even defense. There is no way to reduce it – it must be paid.
A second reason is the recent government bailouts, which were begun under the previous administration and continue under the current one. These bailouts represent billions of dollars added to the deficit.
A third reason involves extensive expenses related to programs such as Medicare and the prescription drug benefit.
These are just a few of the factors that contribute to the ongoing debt increase. The situation is daunting, but there are glimmers of hope. For example, health care reform can greatly reduce that amount of money spent on Medicare, prescription drug benefits, etc. Defense spending can be decreased if troop withdrawals and the gradual scaling down of our military involvement in other nations. If economic stimulus efforts prove effective, the need for bailouts and other capital expenditures in this regard will be decreased and eventually eliminated. All of these possibilities offer cause for cautious optimism, but the road will be along one.
Robin Trehan is management and financial expert. More information www.LatestBusinessReport.com