It wasn’t Black Thursday, but it was close: The national debt surpassed 100 percent of GDP, as the Dow Jones Industrial Average tumbled a stunning 500 points yesterday, erasing all the market’s gains for 2011.
As far as birthday gifts go, it was like a rotten fish wrapped up in the business pages for President Obama, who turned 50 yesterday.
Raising the debt ceiling -- which Obama considered a godsend -- allowed the debt to jump another $238 billion in a single day, to $14.58 trillion.
This put the United States on a par with Europe’s ailing PIIGS: Portugal, Italy, Ireland, Greece and Spain. In very bad shape, in other words.
For perspective, economists consider debt at 60 percent of GDP a crisis point. The Congressional Budget Office warned in 2007 that if the US wasn’t careful, the debt would reach that ugly index by 2023. But it hit 60 percent in 2010 -- 13 years early -- and kept right on going.
Debt at 100 percent of GDP is a different level of the game -- as Wall Street demonstrated yesterday with its massive sell-off.
And it wasn’t just that.
Overall, debt is growing far faster than the economy. This gives investors and businessmen the heebie-jeebies. No wonder unemployment last week swelled by more than 400,000 for the 17th straight week.
And yesterday’s Dow losses were the worst single-day decline in three years.
It’s odd: Democrats cried for weeks that the sky would fall unless the debt ceiling was lifted -- but only after that manufactured crisis was resolved did things take another evident turn for the worse.
This isn’t to say that the debt-ceiling debate was pointless. In fact, Republicans were correct in seizing the chance to push for massive spending cuts before the debt hits the point of no return.
But the unproved cuts they scraped out may not make much of a difference in the long term: In April, the CBO said it couldn’t even conceive of how the economy could continue past the year 2037, as debt spirals toward 800 percent of GDP.
Talk about nightmares.
The president brushes off criticism, asserting that the issue is rooted deeply in the Bush years.
That’s true, up to a point.
But the problem is now his to resolve, and he seems substantially at a loss as to how to proceed.
Hence yesterday’s bloodbath. |
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