What the Growing Deficit Really Means

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.

  • Anthony Mason
    Anthony Mason

    CBS News senior business and economics correspondent; Co-host, "CBS This Morning: Saturday"