The Quiet Debt Crisis

Tim Geithner

There wasn’t a stark government warning. You didn’t hear it on CNN or NBC. But on January 4th, 2012 the U.S. federal government, without fanfare, quietly slipped into emergency debt crisis mode… again.

Remember last summer when Treasury Secretary Tim Geithner gravely warned that the clock was ticking down and the federal government would default on its debt if we didn’t raise the debt ceiling by August 2nd?

Remember that Congress, true to form, argued over it until an 11th-hour agreement on August 1st?

No, you don’t remember?

Well, guess what? Its happening again! The clock is ticking down. Has been for 27 days. Its at T-minus 51 days and counting until default day.

The Quiet Debt Crisis

National Debt has remained steady at 15.236 trillion from 1/4/2012 to present

Proof, shown in the above table, that we are in a quiet debt crisis is the national debt hasn’t budged an inch since January 4th. That never happens under normal conditions. It always goes inexorably upward!

Default won’t happen, though.

Unlike last time, Congress would have to actually do something special to prevent the debt ceiling from being raised. That will never happen. Congress will only pass popular eye candy legislation to get reelected this year.

Big government and the national press are proving that unless forced to do something about it, neither could care less about federal debt.

National Debt Growth Slowed Last Year

The good news is that, in 2011, the federal government borrowed only $3.4 billion more per day than it took in… down from about $4.2 billion/day the previous two years.

In 2011, the national debt grew only $1.2 trillion… down from $1.7 trillion the previous two years.

Was this drop the result of carefully crafted government policy or from the trillions in spending cuts haggled over and passed by Congress last year? Heck, no! Neither one.

Most of the 2011 savings came when ARRA “Stimulus” spending ran out. ARRA spent about $420 billion/year in 2009 and 2010. All of it was funded by deficit spending.

Ending ARRA accounts for almost all of 2011’s debt drop.

National Debt Interest Grew Last Year

Unfortunately, in 2011, the amount of interest paid on the national debt grew to its highest level in history – $454 billion.

That is up nearly 9% from $414 billion in 2010.

We could have paid a lot of unemployment benefits to displaced workers with the $40 billion more in interest that was paid out last year.

All interest paid on the national debt is not just money out the door.

For example, national debt interest paid out to Social Security for our national retirement plan is a good thing. Social Security loaned its entire trust fund, $2.6 trillion, to the federal government.

China got about 1/3rd as much interest payments as did Social Security.

The Good, the Bad and the Ugly of Emergency Debt Mode

The Good… taxpayers are saved a few bucks of hard earned cash when the federal government is forced to spend within its means.

The Bad… in emergency mode the federal government just borrows from various federal pension funds, like from the postal service, and other places that are normally barred by law from federal government raiding.

After the federal government raises the debt ceiling again the first thing that happens is those emergency funds raided from pension funds are paid back. That happened last August 2nd, 2011 to the tune of $238 billion.

The Ugly… the federal government continues deficit spending like a drunken sailor no matter what.


The U.S. federal government went into emergency spending mode on 1/4/2012.

On that date we reached the legal debt ceiling limit. Congress had been warned weeks earlier we were within $100 billion of the debt ceiling. We’ve remained there for the last 27 days.

That all happened without fanfare or media scrutiny.

Emergency debt mode will probably go unnoticed during this election year. Congress would have to vote NOT to raise the debt limit for it to get noticed. That will never happen!

But debt should not be ignored.

Whether we like it or not… federal debt is what ultimately will bring down every household in America.


About azleader

Learning to see life more clearly... one image at a time!

Posted on Jan 31, 2012, in 2012 Elections, Debt, Debt crisis, Deficit, economics, Economy, National Debt, Politics, The Stimulus, Tim Geithner. Bookmark the permalink. 1 Comment.

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