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Sky No Longer the Limit for U.S. National Debt

Interest-Rates / US Debt Sep 12, 2012 - 03:03 AM GMT

By: Pravda


The U.S. national debt has hit a new record. It has long been clear that no one can handle the problem. Therefore, the term, which the U.S. will need to come close to the legislative ceiling of this indicator, remains the main topic for speculation and forecasts. It is possible that the Americans will make it during the remaining several months of 2012.

The favorite subject of fierce fighting between Republicans and Democrats becomes relevant again. A few days ago, the U.S. Treasury announced that the national debt of the country exceeded $ 16 trillion for the first time. Each taxpayer owes creditors of the United States 140,000 dollars. According to the U.S. Census Bureau, there are a little more than 314 million people living in the country, and 114 million of them are taxpayers.

This does not either surprise or frighten anyone. However, in this case, the U.S. has come too close to the legislative limit of the debt, which was set at the level a bit below $16.4 trillion. Experts note that the country will reach this limit already this year. If there is no new law approved to raise the debt ceiling, the U.S. will no longer be able to borrow money to pay its obligations, the Voice of America said.

In February, the U.S. national debt stood on the level of $15.977 trillion. The country's budget deficit for 2012 fiscal year is forecast at $1.1-1.2 trillion. Back in 2007, the U.S. national debt made up $ 9 trillion. In 2011, after a heated debate between Republicans and Democrats, the country raised the borrowing limit, albeit with immense difficulty.

Anna Bodrova, an analyst with Investkafe, says: "They raised the limit deliberately to the desired level mindful of the fact that the country will go to the polls in November 2012. Both Republicans and Democrats needed that, because there are two bright representatives from the two parties participating in the race.

"Now it is clear that shortly before the election, the national debt can reach the ceiling set a year ago. If so, the first thing that the president-elect will face will be confrontation with the Congress over adjustments in the law that allow a raise for the debt limit. Thus, it is obvious that the situation is hopeless. On the one hand, it is risky to follow the beaten path. S&P has warned before that it would downgrade the U.S. rating if last year's political battle repeats again. On the other hand - so what? The United States has been living in debt for decades, and the country is ok about it.

"To date, the budget deficit in the U.S. is $ 1.2 trillion. It is clear that there is no money in the treasury to solve the problem - it is impossible to pay the huge debt of many years in one fell swoop. Maybe they should not repay this debt at all. Barack Obama's chief adviser David Axelrod has recently noted that the American leader had a credible plan on how to reduce the deficit, but the plan is unlikely to work in the near future. One has to understand: reducing the deficit now means stopping all movement within the economy. For the global market, which can hardly move right now, it will be a stab in the back."

Republicans interpret this situation in their favor, of course. One of the most powerful Republicans, House Speaker John Boehner, said Tuesday that the record debt became another sad reminder of the fact that President Obama did not keep his promise to halve the deficit. Spokesman for the Obama campaign headquarters Ben Labolt told Yahoo! News that when it comes to the growing national debt, Republicans would have to repeat one of the slogans that was said many times at their convention last week: "We built it!"

The U.S. budget deficit makes up $ 1.2 trillion. The largest expenditure articles of the U.S. budget include the spending on health program "Medicare" and "Medicaid" - just over $789 billion. Moreover, no other government would risk cutting the spending further. In fact, America takes the problem of its public debt philosophically. No one remembers the time when the U.S. was debt-free. However, for the current government this is still a problem. A very big one.

Valentin Vasspard


Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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