Burdened By Debt: US Owes As Much As It Makes
When you put together everything Americans produce in a year, it adds up to some $16 trillion -- an almost unimaginable amount of money. Now for the first time in its history, the United States owes its creditors that same amount.
The $16 trillion of federal debt is as big as the nation's entire economic output for a year. In other words, if each dollar the U.S. produced for an entire year went to the federal debt, it would just barely pay it off.
Not since the height of World War II, when the debt exceeded 120 percent of the gross domestic product (GDP), has the nation been this much in the hole.
Fiscal hawk Sen. Marco Rubio, R-Fla., sees great danger ahead.
"The consequences are grave moving forward," he told CBN News. "Because not only is the debt high, but according to the Congressional Budget Office and all the experts who are looking at it, there's no plan in place to change that any time in the near future."
"It's debt as far as the eye can see," he said.
Phil Kerpen is a conservative economic analyst at Americans for Prosperity and author of the book Democracy Denied.
He pointed out there's little reason to think a country's GDP and its debt would have anything to do with each other. But he said research shows they do.
"When countries get above 100 percent of GDP, they have real difficulty financing their debt, and it tends to precipitate major fiscal challenges," Kerpen told CBN News.
Rubio puts some of the blame for the persistent hard economic times on the debt.
"The existence of this debt without a plan to fix it is really slowing down the ability of this economy to recover," he stated.
"And people are hurting," he said. "Go ask them. You'll see people are hurting. They've lost their jobs. They're working twice as hard, making half as much."
As Good as Our Word?
"Our country's never been here before. We've never had a debt bigger than our economy, with a plan to double that debt. There's not that much money in the world to borrow," leading Tea Party Sen. Jim DeMint, R-S.C., warned.
In his book Now or Never: Saving America from Economic Collapse, DeMint noted that the world has long made the dollar the most valuable currency because of trust.
"And the only thing that makes that dollar valuable is faith, that we can pay our debt, that that dollar is always going to be good," DeMint explained to CBN News.
"But we have to borrow 43 cents on every dollar we're spending now, and the rest of the world understands that," he said.
"If you did that as a family or as a business, you're out of business. You're out of business, you're bankrupt," he told CBN News.
The Least Dirty Shirt
Some countries in Europe are already facing a debt crisis. Kerpen said that makes America's financial condition look better than it actually is.
"What's keeping the U.S. afloat right now is that Europe is in so much worse condition than we are, that there's still a big demand for U.S. debt," Kerpen said.
"And I don't think we can count on being sort of the least dirty shirt in the hamper so investors will keep putting us on," he warned.
DeMint worries that the troubles in Europe could eventually lead to serious ripple effects here in the U.S.
"Our banks are heavily invested in Europe," the Senate's Tea Party leader pointed out. "If the euro collapses, dominoes could start to fall this year. And after that starts to happen, people lose confidence in our dollar."
Whether it's a crisis in Europe or just the constantly growing debt, Kerpen and others warn that at some point, the cost of paying back the debt is going to go up -- way up.
"Interest rates are going to be sharply higher if we don't change the course of our fiscal policy in this country," Kerpen stated. "You can't keep this going forever."
J.D. Foster, who served in the second Bush administration as chief economist at the Office of Management and Budget, agreed.
"Then you go from a situation where the interest rates are creeping up to moving up to skyrocketing up," he warned.
Debt-Riddled Dollar Disaster
Foster, now a Heritage Foundation expert on fiscal policy, said doubt in America's debt-riddled dollar can quickly turn to disaster, like in Portugal where interest rates have soared.
"In Portugal right now, their 10-year treasury is trading at about 18.7 percent," Foster said. "Ours is about 2 percent."
"What's the difference between a solid country that has a still high but manageable debt-to-GDP ratio and one that's a disaster? Two percent versus 18 percent," he said.
If such skyrocketing interest rates hit the U.S., Kerpen warned, "Just interest expense will start to consume an enormous amount of the federal budget."
In other words, it could cost several hundred billion dollars every year just to pay the interest on the debt, in addition to paying off the debt itself.
"It means your entire economy starts to implode," Foster stated.
DeMint warned the U.S. has no one to turn to for help.
"We're going to be worse off than Greece because no one can pick us up," he said. "No one can bail us out."
Servant to the Lender
The Tea Party senator doesn't stop there.
"What Greece has found out is once you're bankrupt, then you can't make your own decisions anymore," he explained.
"Other countries are telling you what you have to do. Our creditors will tell us what to do because, as we know, the borrower is servant to the lender," he said.
So the question is, will the U.S. be its own master in the future? Or will it be brought low by a crippling financial crisis because American politicians couldn't control their spending?