Chart Of The Day: America's Debt Crisis - Who Really Is Responsible?

Tyler Durden's picture

Yesterday we brought you the news that US debt quietly soared by $90 billion overnight to celebrate the new fiscal year end, reaching $16.2 trillion and sending total US debt to GDP to 103%. Needless to say, this comes at an exciting time, with the first Wall Street muppet presidential debate in about 12 hours, where the US debt crisis will be a front and center topic because in about 2 months, the US debt ceiling will again be breached adding to the Fiscal Cliff fiasco, resulting in a flashback to August 2011 when the market had to tumble by nearly 20% for Congress to get the hint that first and foremost its job is to make sure the money on Wall Street keeps flowing, all else secondary. And while it has become fashionable to say that US debt rose by this much under that president, the truth is that the Presidency is merely one of three institutions that are responsible for the shape of the US debt-to-GDP line (which is now going from the lower left to the upper right by default). The other two are, of course, Congress and the Senate. Luckily, to simply things substantially, we have a handy graphic from today's Bloomberg Brief which conveniently plots not only the political affiliation of the presidency, but of the House and Senate, in the chronology of the US debt crisis.

From BBG Brief:

The U.S. debt ceiling and impending fiscal cliff are likely to be important topics at tonight’s presidential debate.

 

If the government fails to reach a deal to avoid all or part of the $607 billion fiscal cliff by the end of this year, the U.S. economy is at risk of being thrust back into recession in the first half of next year.

 

A rapidly increasing U.S. debt load, approaching the $16.4 trillion debt ceiling, amplifies potential downside risk. In 2011, failure to raise the debt ceiling led to the first ever downgrade of the U.S. by Standard & Poor’s.

 

This year, U.S. debt has increased by an average monthly 0.6 percent. If this trend persists, the current debt ceiling may be breached as soon as January, risking additional downgrades and substantial volatility in global financial markets.

 

The MSCI World Index dropped almost 20 percent between April 18, 2011, when Standard and Poor’s placed the U.S. on negative outlook, and Oct. 4 2011, its year low; 30-day volatility rose to 29.4 from 14.6 during the same period.

 

The U.S debt ceiling has been raised 17 times since 1995 by an average of 8.5 percent. Four of those increments came during Bill Clinton’s presidency, averaging 9.5 percent. An additional seven increases occurred during President George W. Bush’s time in office, averaging 9.6 percent. Since President Obama took office, the debt ceiling has been increased on six occasions, by an average of 6.5 percent.