The Government Accounting Office, GAO, issued its annual report of the financial state of the federal government and the news was not good. Barack Obama is bankrupting America, burying us and future generations in unsustainable debt. The results of their report are admittedly incomplete, as their audits of several major federal departments, such as Defense or Health and Human Services, proved to be lacking. The bottom-line, however, is that we are at least $18.8 Trillion dollars in the hole! Perhaps this is why the German bank has demanded that our Federal Reserve Bank hand back some 300 tons of gold? Is our dollar destined to collapse?
Understanding the federal budget deficit and debts is a difficult undertaking, as the whole truth is obscured by various accounting practices. Our Debt Ceiling of $16.394 Trillion dollars has been reached as of the end of last year. But it is not the whole story. For example, the GAO breaks down our public liabilities to be $11.3 Trillion dollars in publicly held debt in the form of U.S. Treasury securities, add to that some $6.3 Trillion owed to the federal employee and veterans benefits and another $4.9 Trillion dollars raided from federal trust funds like Social Security and Medicare. There are other factors as well, such as the differences between ′non-interest spending′ and ′interest-bearing spending′ to help confuse us.
The grim facts, at best, are the following: that in Fiscal Year 2012, the federal debt level was at least 73% of the nation′s GDP level. So for every $4 transacted in the ′real economy′, we as a people owe $3 to ourselves and our future generations, as well as any foreigners stupid enough to buy our debt securities. The GAO report further projects that by Fiscal Year, FY, 2022, the nation′s debt will be 78% of GDP, in FY2042 it will be at least 145% and by FY2087 it may be at least 395% of GDP. One must keep in mind, also, that these budget projections are based on two key factors.
One being that we have an average growth rate of about 5% each year (we barely have half of that now) and that the interest rate on our debt remains low. Currently we are borrowing money at about 0.5% whereas the norm is closer to 3% or more. If the government froze spending at current levels, it would take about 75 years to pay off the debt. In FY2012, interest payments on our National Debt amounted to about $240 Billion dollars, about 6% of all federal spending. Should interest rates return to more normal levels, those numbers would increase by a factor of at least 5 or 6 times, making such payments the single largest aspect of the budget.
Of course, thanks to the lazy, incompetent leadership of Barack Obama, and the lack of action by the Democrat controlled Senate, led by Harry Reid, we have not had a new, annual federal budget for about 1360 days. The latest Republican ploy concerning an increase of the nation′s Debt Ceiling is to limit such for just three months and demand that the Senate pass a new and more responsible federal budget. Projections for FY2013 are already looking to exceed $1.1 Trillion dollars of new debt, about $200 Billion more than previously predicted. Barack Obama has already made it quite clear this past Monday that not only does he think that there is no spending problem but he also wants a new round of additional stimulus spending to the tune of about $500 Billion.
The new GAO report also bore other bad news, showing a failure in protecting our borders with an estimated 3 million more illegal immigrants entering the United States and major problems with the new government agencies authorized under the Todd-Frank law for overseeing our banking and financial industries. Cost projections for ObamaCare, the ′Affordable′ Care Act, also went up, further eliminating any alleged budget reductions promised by the Obama administration. So we are in store for more uncertainty, if you choose to ignore the certainty that our economy will become even worse. Who can blame the Germans for wanting to get their physical gold assets returned? Heck, our U.S. Mint has even stopped selling silver bullion coins because we ran out of silver this week due to people seeking safety in precious metals. How far off can a collapse of the U.S. dollar be?