WASHINGTON (AP) – What is $1.42 trillion? It’s more than the total national debt for the first 200 years of the Republic, more than the entire economy of India, almost as much as Canada’s, and more than $4,700 for every man, woman and child in the United States.
In New Zealand dollars that is $1,920,740,000,000.
It’s the federal budget deficit for 2009, more than three times the most red ink ever amassed in a single year.
And, some economists warn, unless the government makes hard decisions to cut spending or raise taxes, it could be the seeds of another economic crisis.
Treasury figures released Friday showed that the government spent $46.6 billion more in September than it took in, a month that normally records a surplus. That boosted the shortfall for the full fiscal year ending Sept. 30 to $1.42 trillion. The previous year’s deficit was $459 billion.
Without significant budget cuts, that would crowd out government spending in such areas as transportation, law enforcement and education. Already, interest on the debt is the third-largest category of government spending, after the government’s popular entitlement programs, including Social Security and Medicare, and the military.
And Bush was bad enough as a fiscal disaster, but this is an all new level. And I agree if nothing is done, it will trigger an economic crisis.
“The rudderless U.S. fiscal policy is the biggest long-term risk to the U.S. economy,” says Kenneth Rogoff, a Harvard professor and former chief economist for the International Monetary Fund. “As we accumulate more and more debt, we leave ourselves very vulnerable.”
Forecasts of more red ink mean the federal government is heading toward spending 15 percent of its money by 2019 just to pay interest on the debt, up from 5 percent this fiscal year.
President Barack Obama has pledged to reduce the deficit once the Great Recession ends and the unemployment rate starts falling, but economists worry that the government lacks the will to make the hard political choices to get control of the imbalances.
Friday’s report showed that the government paid $190 billion in interest over the last 12 months on Treasury securities sold to finance the federal debt. Experts say this tab could quadruple in a decade as the size of the government’s total debt rises to $17.1 trillion by 2019.
It is worth noting that Labour in NZ are promising bigger deficits, and mroe debt.