The most important piece of news this week wasn’t the ADP report, or the weekly jobless claims. It wasn’t the ISM’s service-sector report, or the latest updates on BP’s Gulf oil spill. It wasn’t the Gore’s split-up, or even Armando Galarraga’s stolen perfect game, and it won’t be Friday’s jobs report for May. No, the most important piece of news this week, the one that will have the most lasting impact, was this:
The national debt crossed the $13 trillion mark.
It wasn’t a surprise, of course. Anybody who walks on 45th 44th Street by Sixth Avenue has seen the big debt clock there over the IRS office. It’s been rising steadily. But crossing another milestone, and so quickly after we crossed the $12 trillion mark, really should be yet another wake-up call for the nation. You think the Macondo well’s a real gusher?
Gross domestic product in 2009 was about $14.4 trillion. That puts the national debt at roughly 90% of GDP. That’s a danger zone beyond which nations don’t generally recover. Even for the world’s largest economy, we are passing the point at which we can still earn our way out of our debt, no matter how many jobs we create.
Now, obviously, nobody but nobody wants to call the government of the United States to the mat about its debt. A sovereign debt crisis in the world’s largest by far economy would be like dropping a dozen nuclear bombs on the global economy. Nobody would recover. So expect the world to nervously play along as our duly elected leaders pretend to have a firm grasp on this problem.
But we are at the point where some painful choices are going to start forcing themselves on us (indeed, at the state level, this is already happening.) Higher taxes. Cuts in services. Cuts in benefits and entitlements. Maybe even a shrinking of the military. All the options are going to have to be on the table, because very soon, if not already, we won’t be able to just jawbone this problem any more.
(Photo: Paul Vigna)