What the Growing Deficit Really Means

With Debt Increasing so Rapidly, Americans Will Likely be Paying Higher Taxes

(CBS)  Here's the bottom line on America's ballooning budget deficit:

"It means you're ultimately going to be paying higher taxes," said Chief Economist with MKM Partners Michael Darda.

The total national debt, according to one study, amounts to $184,000 for every man, woman and child in the country. It's like a massive mortgage we're all paying interest on, reports CBS News correspondent Anthony Mason.

The U.S. is still a $14 trillion economy. But the nation's debt is now more than 50 percent of the country's economic output - the first time that's happened since World War II.

"The debt of the United States is growing so rapidly, we are viewed by the rest of the world as profligate, imprudent and incapable of managing our own affairs," said Peter Morici, an economist with the University of Maryland.

The government has been spending borrowed money to fight the recession and to finance wars in Iraq and Afghanistan. The deficit is expected to continue to grow $9 trillion over the next decade as we face the swelling cost of entitlement programs like Social Security and Medicare.

"We'll either need wrenching, wrenching spending cuts, a boom in the economy or a new funding source or some combination to get this fiscal house back in order," Darda said.

Income tax hikes alone won't be enough, said Darda. We may need a national sales tax.

"We're all going to have to have a stake in this game," Darda said. And we're all going to have to pay a little bit more and probably get a little bit less."

The U.S. Economy needs an injection of borrowed money to help stimulate a recovery. But long term, the rising debt payments on all those loans could land us back in another economic crisis.

---

CBS News anchor Katie Couric asked Mason more about the economy:


Couric: Lots of economic news today, but let's go back to Ben Bernanke if we could, Anthony. He gets to keep his job, but it sure won't be easy for him, will it.

Mason: Be careful what you wish for. He's had his pedal to the medal trying to get the economy up to speed. When do you take your foot off the accelerator? Too soon it could backslide into another recession, too long and it could overheating - we ignite inflation into other problems so timing is everything.

Couric: Let's end on a positive note. How encouraged should we be by this rise in housing prices?

Mason: These are promising numbers. Eighteen of 20 metro areas showed home prices up for the second straight month. Las Vegas and Detroit - they're still struggling severely. But Dallas and Denver showed price gains for the fourth straight month now. Overall, the numbers remain weak but the hope here is that these are the first signs of a return. Remember, house prices were critical in this whole recession they'll be critical to a recovery.

[devilfly1]

The Key to Economy is to use the term (ABE) Attitude Before Economy based on a penny, which Abraham Lincoln's appearance on it.

Skip the dogmatic and intelligence conversation. It does not go anywhere.

We are burying ourselves with a crap deficit anyway.

Too much drama Shakespeare, which it needs to trigger out.

[widollar]

Big egos of the political leaders and big wars started and maintained by them equalls "big out of control debts" for the citizens of that country, and a much lower standard of living for the middle class.

[babooph]

Sure hope the rich do not have to pay -all the jobs they supply as maids,poolboys & lawn cutters,are the only future the old middle class may have for their kids.The only time the rich did so well in the past was prior to the deepression [25% unemployment then-hope they let us do better now].

[ffoulkes-2009]

If you don't have a job, look around. There are plenty to be found. Sure they don't pay 20 bucks an hour, but they do pay. If you are too important to work for minimum wage, you are too important for others to help you.

Everyone that takes a minimum wage job then has money. This money goes into the economy, thus producing more jobs (higher paying ones). You don't do anyone a favor (including yourself) by taking in unemployment while sitting on the computer blogging and complaining. Get out and support yourself, thus doing your part for the economy.

[kevjustice]

Only "civilized" countries will spend the money needed for universal health care.

[babooph]

Notice both parties QUICKLY vote for massive debt for two stupid losing wars -WITH NO END!!!!BUT BOTH parties unite to stop spending for health care !!!!The phoney propaganda system lets them get away with "govt cannot handle healthcare"--THE US MILITARY IS NOT A PRIVATE COMPANY & IS RUN BY THE GOVT__DUUUHHH.Lets give the military to the banks then?

[johnhouse]

I am hopeful for people like Dr. Bernacke and Mr. Geithner. Recent market growth seemed more like cycles of speculation. When has a personal portfolio actually increased in value.

If we can put money in businesses that are growing by giving customers what they want, leave it there and in five years have greater value, we have hope. The savings, taxation and growth in income will come.

Prior to the Bush Bust, we saw banks growing by charging outrageous fees to captive consumers, products of deteriorating quality, and so called cost cutting that had more in common with cannibalization than business organization. If the current administration can make incentives for productivity instead of the Republican era speculation and manipulation.

We need to earn money by doing what is worth doing and by using what we make to pay for what we need. Short term, we have to borrow, long term, we must earn.

[kevjustice]

Republicans destroyed our economy and much of the world's economy because of their policy of deregulation. Democrats were involved too, but Republicans led the charge.

[salmoc44]

If Republicans had credibility:

Bush's tax cuts and economic policies would have added to Clinton's surplus.

Iraq would have been cheap and easy.

Osama Bin Laden may have run but couldn't have hidden.

There really wasn't a recession last year.

The fundamentals of the economy really were strong.

Less Gov't regulation of housing markets wouldn't lead to a housing crash.

McCain's pick of Palin would have guaranteed him the Presidency.

The DOW would keep dropping because of the market's fear of Obama.

[salmoc44]

Total spending on health care, per person, 2007:
.
United States: $7290

Switzerland: $4417

France: $3601

United Kingdom: $2992

Average of OECD developed nations: $2964

Italy: $2686

Japan: $2581

Think about how much extra Americans would have to spend and the resultant tax revenue the gov't could take in to reduce our deficit if Americans weren't getting totally ripped off on healthcare? Republicans like the status quo.

[salmoc44]

Cons here told us in the spring that the DOW would continue to tank because of the market's fear of Obama. This was months after they told us that the Sarah Palin pick by McCain would put him over the top in November. Many of them believe in "death panels" and that Obama was born in Kenya. They think tax cuts are good for deficits and that torture is as American as apple pie. There's no reason to give nearly all of them any credibility whatsoever.

[salmoc44]

Bush's tax cuts and his unnecessary war exploded the deficit. We almost slipped into a depression as a result of his economic stewardship. Americans in poverty increased.

Clinton's tax increase gave us a surplus and the economy prospered for years. Poverty went down.

What did the Republicans want to do if they got the Presidency under McCain? More tax cuts for the rich.

[salmoc44]

"You know, Paul, Reagan proved deficits don't matter"

Republican Vice-President Dick Cheney said this to Treasury Secretary Paul O'Neill

This is how leading Republicans care about deficits when they are in charge.

[robham777]

by Solarrays247 August 25, 2009 10:14 PM EDT

Yeah, well we should have thought about this eight years ago when we embarked on an illegal war in Iraq for oil!

Why don't we just use some of that oil money to get out of this predicament.

[Solarrays247]

"The debt of the United States is growing so rapidly, we are viewed by the rest of the world as profligate,..."


Yeah, well we should have thought about this eight years ago when we embarked on an illegal war in Iraq for oil! It's kinda late for this now, doncha' think?

[ubrew12]

A GOP congress.

[the_Candor]

"Yes, why did Bill Clinton start that lie about WMD, which Hillary then repeated when she voted for that war?"-cheerup91
what!! that lie came from Bush's torture chamber.

[ubrew12]

The national debt has grown 10-fold in the past 30 years and is forecast to double again in the next ten. The burden of paying for that debt will enslave working Americans for generations to come, effectively, forever.

We can all agree on that, at least.

[ubrew12]

Import tariffs are far more likely under a DNC administration than a GOP one. After all, GOP are all about the 'invisible hand' and 'free markets', including free international markets. They are the zero tariff group, NOT the DNC. I expect import tariffs to increase, under Obama. Vote in a GOP'er, and they will decrease again. However, understand that moving to import tariffs is an admission that your domestic market is noncompetitive. The GOP'ers are right in the 'steady-state' case, that international markets should, by and large, be free. Let the micronesians make coconut butter, if that is where it is cheapest to make it. Closing your domestic markets to international competiton is only permissible if you REALLY think that gov't intervension in a market will make YOU competitive in the LONG term, OR when your economy is SOOOO fvcked up (like now) that you need a breather from international competition just to get your house in order. NOW is the right time for tariffs. Obama may be unwilling to go for them because the international wealthy basically OWN this U.S. society, including WallStreet and Wash DC, and so its a bit of a difficulty going to a set of policies that will impoverish your greatest benefactors.

I believe that U.S. policy is largely governed by the international wealthy, including the Saudi's and Israeli's. And they have no interest in import tariffs, under ANY administration, GOP or DNC.

[the_majesty]

If ubrew12 is against a national sales tax.
It must be the best way to go.

[robham777]

by ubrew12 August 25, 2009 9:30 PM EDT

a house-of-cards economy that TANKED just as Obama was taking office

So really since it was not his fault he should feel free to take the country further down the path to destruction.

[salmoc44]

Thank God Obama won the Presidency. Otherwise, Republicans would have had to continue ignoring deficits.

[velma179]

Uh............. cheerup91.........what?

The Democrats deny deficits exist?

You don't read very well, do you? The deficit predictions come from the CBO (Congressional Budget Office) and the White House.

The White House, oh yeah that place where Democrats live and work!

And these deficits are cumulative, so yep, Bush shares in the responsibility as well as previous administrations. There are a lot of issues that can be politicized... deficits are equal opportunity bad actions.

[Aldymac]

I had a friend fifteen years ago who was an IRS agent, he said many agents at that time would like to see a national sales tax, they said then that it would bring the nation back in the black.

[ubrew12]

How about just a tax on people in poverty? That would make about as much sense.

[ubrew12]

Inflation is going to hit poor people big time. Its a tax on wage earners. To ALSO tax sales, which hits poor people much harder than rich people, is just asking too much for poor and middle class people to bear.

We need to return to the progressive income tax levels this country used between 1930 and 1980, which ironically coincided with an America that became or WAS the best economic, military, social, and ethical force IN THE WORLD.

[robham777]

by ubrew12 August 25, 2009 9:41 PM EDT
Income tax hikes on the rich are perfectly sufficient, if taken over a long enough time. It took 30 years to get us to this dismal place, it should take 30 years to get us out of it.

It will take way longer than that, and I thought you posted on another thread that you were Canadian.

[ubrew12]

Nope. American. Thinking of being Canadian, if things get bad enough. The experience of Spain 1930, Italy 1930, Germany 1935 suggest the smart guys just LEFT.

[ubrew12]

To explain further: a previous poster brought up the specter of dollar devaluation (i.e. inflation). Oh, that's GOING TO HAPPEN, even as taxes go up. Inflation is a tax on wage-earners, rather than equity-owners, so those of us earning a wage would be smart to GET OUT before it hits. Which is probably just fine with the equity-owners of America (i.e. the rich) anyway.