The Unabridged And Illustrated Federal Budget For Dummies - Part 3: Debt & Deficits

Tyler Durden's picture

Excessive spending has created record levels of debt and deficits, and the worst is yet to come, threatening opportunity and prosperity for younger generations. In these 10 charts, via The Heritage Foundation, we highlight the third (and arguably most frightening) in our four-part series on the Federal Budget - Debt & Deficits.

Publicly Held Debt Set to Skyrocket

Runaway spending on Medicare, Medicaid, and Social Security will drive federal debt to unsustainable levels over the next few decades. Total national debt consists of publicly held debt and intergovernmental debt. Intergovernmental debt is the amount that the government owes to specific programs or agencies, such as the Social Security Trust Fund. Publicly held debt is more relevant to credit markets.


Each American's Share of Publicly Held Debt Is Skyrocketing

As Washington continues to spend dramatically more than it can afford, every American will be on the hook for increasing levels of debt. Without reining in spending, the amount of debt per citizen will skyrocket.


Obama's Budget Fails to Solve the Debt Crisis Despite $2 Trillion in Tax Hikes

In 2008, publicly held debt as a percentage of the economy (GDP) was 40.5 percent, nearly four points below the post-World War II average. Since then, the debt has increased by 45 percent. The President's FY 2013 budget would increase the debt to 76.5 percent by 2022, despite $2 trillion in tax hikes.


Obama's Budget Continues Unprecedented Deficits

The President is responsible for submitting an annual budget to Congress and has the authority to veto legislation, including irresponsible spending. Most Administrations have run small but manageable deficits, but President Obama's unprecedented budget deficits pose serious economic risks.


Federal Budget Deficits Will Reach Levels Never Seen in the U.S.

Unless entitlements are reformed, spending on Medicare, Medicaid, and Social Security will drive deficits to catastrophic levels. While recent budget deficits have reached unprecedented levels, future deficits will be dramatically worse.


Rising Deficits Drive U.S. Debt Limit Higher, Faster

The Budget Control Act, a result of the contentious 2011 debt ceiling debate, increased the debt limit by $2.1 trillion, but failed to rein in the key driver of spending and debt: entitlement spending. Congress first placed a statutory limit on the national debt in 1917, in the Second Liberty Bond Act. It has been raised 13 times since 2001.


Interest On the Debt Will Nearly Double Over the Next Decade

As the publicly held debt grows, net interest payments will increase dramatically, even assuming that interest rates remain low. Under current projections, real net interest costs would more than double over the next decade.


Interest on the Debt Exceeds Spending for Many Programs

In 2011, the U.S. spent more on net interest—interest paid on publicly held debt—than it spent on many federal departments, including Education and Labor.


U.S. Debt on Track to Fuel Economic Crisis

Many European countries, like Greece and Italy, are suffering financial or budget crises as a result of mounting debt. Countries such as Spain are not far behind. Unless the U.S. controls spending, America's debt will surpass those of troubled nations, leading to similar economic woes.


Debt to Grow Unless Government Spending Is Reduced

Without significant spending reforms, publicly held debt is projected to reach 187 percent of GDP by 2035. Under the Heritage plan, Saving the American Dream, future federal spending would be reduced by about half, which would dramatically lower the debt to 29 percent of GDP.


Source: The Heritage Foundation

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ACP's picture

Can't the government just "walk away"?

EnglishMajor's picture

Can't we all just get along?

The Alarmist's picture

Can't we get beyond Thunderdome?

wisefool's picture

If you watch South Park Utah, you will understand why Mitt Romney will never be president of the US.

I'd bet on intrade to the fact, but Max Keiser says it is bad for humanity to have such markets in play.

The Alarmist's picture

Where does the IMF get its stats (US debt to GDP only 67% in 2011???).

If the deficits are clocking in at >8% per annum, and the current debt to GDP is above 100%, we are going to cross 187% Debt to GDP somwhere closer to 2022 rather than 2035. Rubicon crosssed.

Matt's picture

According to IMF for 2011, Japan is at 229 percent Debt-to-GDP. I'm assuming this article is based on net debt, not counting debt held by the central bank where interest goes back to the government the following year. Possibly also not counting debt held by Social Security, or other intergovernmental holdings.

hellas4life's picture

Heritage is wrongly including the fiscal year 2009 deficit ( oct 08-oct 09) of 1.4 trillion to Obama. This deficit was predicted and the policies and effects of the recession which dropped tax revenues by 500 bln were in place 4 months before Obama came into office. Not an Obama apologist but those are the facts.

But, the fact remains: the economic downturn, President Bush’s tax cuts and the wars in Afghanistan and Iraq explain virtually the entire deficit over the next ten years.
The deficit for fiscal year 2009 — which began more than three months before President Obama’s inauguration — was $1.4 trillion and, at 10 percent of Gross Domestic Product (GDP), the largest deficit relative to the economy since the end of World War II. At $1.3 trillion and nearly 9 percent of GDP, the deficit in 2010 was only slightly lower. If current policies remain in place, deficits will likely resemble those figures in 2011 and hover near $1 trillion a year for the next decade.
If not for the Bush tax cuts, the deficit-financed wars in Iraq and Afghanistan, and the effects of the worst recession since the Great Depression (including the cost of policymakers’ actions to combat it), we would not be facing these huge deficits in the near term. By themselves, in fact, the Bush tax cuts and the wars in Iraq and Afghanistan will account for almost half of the $20 trillion in debt that, under current policies, the nation will owe by 2019. The stimulus law and financial rescues will account for less than 10 percent of the debt at that time.

Bob Sacamano's picture

So the fix is to let the Bush tax cuts expire -- all of them.  The left will scream the loudest.

hellas4life's picture

the fix is to stop bailing out the banks at least once a decade, get the fed out of the markets, and stop starting wars that end up costing 4-6 trillion.   if we were currently at the historical average of 18% tax revenues to gdp (instead of the current 14-15%) there would be about a 450 bln less in deficit a year (15 trillion economy * (18-15))  here are the historical numbers

The Alarmist's picture

Assessing blame is kind of like arranging the deck chairs on the Titanic.

bshirley1968's picture

Bullshit!  Blame should be placed and the culprit prosecuted.  It wasn't the passenger's fault the Titanic was driven into an iceberg.  We'll go down with the ship and the captain will row away to screw someone else another day.  Justice DEMANDS that someone pay!  Easy to find the guilty, hard to find someone in position with the back bone to throw the switch. BUT-IT-HAS-TO-BE-DONE!  Or else no one is given a moment of pause before they decide to screw someone else all over again.

Curt W's picture

Really?!? Do you remember 9/11  After that almost every Democrat was onboard to go and fight terrorists.  It was 3 years later that they started changing their minds.  Democrats are just as responsible for the first 3 years of the Afganistan/Iraq wars.  The most costly years.  Just last year Obama tried to extend our occupation of Iraq despite the deadline signed by Bush.


hellas4life's picture

here's the vote breakdown of the iraq war


United States House of Representatives

Party Ayes Nays PRES No Vote Republican 215 6 0 2 Democratic 82 126 0 1 Independent 0 1 0 0 TOTALS 297 133 0 3

United States Senate

Party Ayes Nays No Vote Republican 48 1 0 Democratic 29 21 0 Independent 0 1 0 TOTALS 77 23 0

tarsubil's picture

If we only had more honorable Senators like Jon Corzine in office, this country would be saved. Do you realize how this voting record shows that voting records for the most part are just a shell game that are total BS? The big Dem names got to vote against it for their voting score and they absolutely knew that the war would go forward and they absolutely supported it. Maybe Wellstone didn't and that would explain his 'accident'.

Bob Sacamano's picture

So you are saying without the 82 House Democrats or the 29 Senate Democrats in support for the war, it would have never passed.......?  They could of stopped it, but chose not to. 

BHO said we should bring the troops home in six months --- in 2007.  Yet it took him 3 years as commander in chief with full authority to do so. 

Not to mention tripling down on Afghanistan.  Not to mention he is strongly against torture, but wildly in favor of assasination. 


Beam Me Up Scotty's picture

Doesn't matter. Take the 1.4 trillion fiscal 2009 deficit away from him. Add the 4th year on the back end of his term. It will be just as bad or worse than that 1.trill in 09.

hellas4life's picture

deficit has fallen ever year since the bush 1.4 trillion print

bshirley1968's picture

Projections are too far out.  Law of exponential numbers will bring the end a lot sooner.

The "Rising Debt" chart is already parabolic.  It will require more debt to sustain the current "condition" and the debt will further kill any real economy.  Recovery will not be enough.  If we could go back to the economy of ........whenever you choose, it would not be enough to rescue us from the current situation.  Another round of QE and the deal is sealed.  We have passed the point of no return and are now waiting to hit the wall.  We won't have long to wait.

Curt W's picture

The interest on debt is way off.  We add a trillion to the debt every year now.

Any spike in the cost of the debt will cause it to sky-rocket.  I foresee by 2020 a $1 Trillion of interest on our debt.

JustObserving's picture

Why no mention of unfunded liabilities (medicare and social security) of $118.7 trillion or $1,045,681 per taxpayer?

Centurion9.41's picture

Hey JustObserving, you got one right!  Good job.

PS, "unfunded liabilities" is really PC BS.   The correct explanation is ENTITLEMENTS your parents and grandparents voted themselves but didnt pay for.

NumberNone's picture

This financial crisis concern is all a bunch of bullshit.  Clearly we have plenty of money if we can just hand out billions of dollars to illegal aliens for kids that don't even live in the US.  Viva America.

Centurion9.41's picture

The fix to chart #1 is obvious, and clearly laid out in the chart itself.

We could carry the debt % due to WWII because the war flattened Europe and we were the only ones left with an industrial base to rebuild it...

So, f' "drill baby drill"! 

It's "bomb baby bomb"!

See, easy.

Beam Me Up Scotty's picture

If nukes end up flying there won't be anyone around to rebuild.

Matt's picture

America's biggest mistake: letting everyone else have nukes. The Soviets got it from spies, and gave it to their allies. If Israel has nukes, they stole the technology too. Everyone else recieved the technology from America or Russia or from someone who recieved it from them. Nobody else independently invented nuclear bombs (except maybe Diebner).

dwdollar's picture

What was the projected national debt in 2012 back in 2002?

The same corrupt bankers are in charge. The same incompetent politicians are making the same unsustainable promises. The same douche-bag academics worship the same status quo. AND... The same ignorant public is unable to see these jokers for who they really are.

Why should we believe the next decade will be any different from the last one?

Double or triple these numbers if you want to be in the ballpark.

jmcaule4's picture

Like Zero Hedge? King World News?

Want to know when to expect the next round of QE?

Is it a good time to be long stocks? What about gold miners?

r00t61's picture

This is the same Heritage Foundation that never met a war it didn't like?

Heritage, AEI, PNAC, many neocons, so little time...

I like how they call their budget plan the "Saving the American Dream" plan.

The only thing more Orwellian would be a piece of legislation that gave carte blance to the intelligence-industrial complex to poke into the lives of its citizens, and call it the PATRIOT Act.

Oh, wait...

skepticCarl's picture

If there is any good news in all of this, it is that there are a few countries like Greece and Japan that are ahead of us on the insolvency curve, and that we (individuals and investors) can learn from the forthcoming implosions.  Naturally, our governments and financial institutions will learn the wrong lessons: they will continue to double down, and throw away more treasure, like a losing general in a battle, and fight to the bitter end.  There's never been a Plan B.

hangemhigh77's picture

But the REAL question is WHO do we OWE this "supposed" debt to???  The BANKS. This is a no brainer...tell the banks to get fucked and instantly ZERO debt. So Warren "I'm a GS vampire squid bankster scumbag" Buffet goes broke, who really cares?

Matt's picture

Because the banks are all privately owned by the 1 percent. /sarc

The banks' bonds and shares and the USTs are held by various funds that finance people's retirements. Defaulting on the national debt would wipe out the retirement money from many boomers. You know, the group with the largest chunk of voting power and biggest chunk of the wealth by demographic group.

Having millions of destitute old people would create quite a crisis, I am certain. 


kralizec's picture

Deficits and Debt are all the fault of Ronald Reagan and the Flying Bush' saith the Democrat-Media Complex and they are never wrong.