Originally Posted By: Blaine Wiley
This post was automatically imported from our archived forum.
That is absolutely correct. The national debt is just that, debt. Owed to many banks. Many US banks thrive on the interest paid to them by the US government alone.
At 30% or so of the GDP, the debt is not actually that much of a problem. The problem we have is government spending, and of that, spending on "entitlements", which at present covers over 50% of the budget. Now with the new prescription drug coverage it will further erode the discretionary spending side of the budget, i.e. military, homeland security, transportation, etc. God help us all if we ever get national health care. We'll be looking at doubling the tax rate in short manner!
Back to the point of government spending. If we simply maintain a balanced budget in future years, the national debt would fall to 23 percent of gross domestic product (GDP) by 2011 and 18 percent by 2015. Such a minor debt is not an economic problem. The national debt was 60 percent of GDP in 1950 and just under 50 percent in 1960. Now by balanced, I mean truly balance, not just the paper surplus forecasts we had in the late 90's.