U.S. Debt Now Over 100% of GDP – Corporate Leaders Weigh In
October 23, 2012 Leave a comment
With the U.S. government continuing its deficit spending this year, estimated at $1.1 trillion by the Congressional Budget Office, the U.S. debt inches closer to the $16.4 trillion debt ceiling agreed on by Congress in July 2011. According to recent data released by the Treasury Department, the government surprisingly ran a surplus of $75 billion in September. Despite September’s anomaly, the federal debt ceiling is projected to be reached by January 2013.
Last Monday corporate leaders of some of the biggest companies in the U.S., members of a campaign called “Fix the Debt”, urged Congress to come up with plans to alleviate the nation’s growing debt problem. The solution: Increase taxes for the wealthy and cut federal benefit programs such as Medicare and Social Security. The proposed measures go directly against what either party desires. Democrats look to maintain spending on social programs while Republicans want to keep the tax rates for wealthy Americans at current levels.
Austerity seems to be the only way to dig the American economy out of this hole. Robert Greifeld, chief executive of stock exchange operator Nasdaq OMX Group Inc, told a Bloomberg Television roundtable that everyone is going to have to take part in the recovery, noting that, “there has to be shared pain.” Scott Davis, CEO of United Parcel Service Inc., agreed with the sentiment expressed by Mr. Greifeld.
At some point, the growing debt problem facing America has to be dealt with. Historically, the debt as a percentage of GDP rose to an all-time high at the end of World War II when it stood at 126%. After slowly decreasing to a low of 33% in 1981, the debt has been steadily increasing for the last three decades. The consequences of America’s debt problem have repercussions for the entire global economy, slowing down world commerce. At home, racking up more debt puts more pressure on future generations of Americans to solve the problem.
There is a growing concern about the debt among CEOs. Steven Rattner, head of Willett Advisors LLC said that “for the first time, there is tremendous support in the business community even if it isn’t exactly what everyone in the business community would want to see”. With more CEOs emphasizing the need for a solution, the prospects of turning the tide become brighter. How the debt problem will be dealt with remains uncertain – many factors, such as the outcome of the election and the raising of the debt ceiling play a big role. What is certain as of right now is that the US debt problem is bigger than it has been for more than sixty years.
Posted by: Samuel Benka
Sources: The New York Times, The Wall Street Journal, Reuters