How much 15.8 trillion dollars debt equal to?
On 2nd of August 2011, A few hours before getting into default U.S government passed legislation for raising the country’s 14.3 trillion debt ceiling. It allows Obama to make another 2.1 trillion dollars debt that is enough for him to finish his presidency in 2012. That means in November 2011 U.S government’s debt will go up to 15.8 trillion dollars that is 100% of this country’s GPD. Meanwhile government will cut 2.4 trillion dollars spending in ten years.That also means by 2021 government’s debt will reducing 2.4 trillion dollars from the debt then.
2.1 trillion dollars debt and 2.4 trillion dollars budget cut seems are balance each other. The tricky point is that 2.1 trillion dollars debt is just enough to support about one year budget deficit and 2.4 trillion dollars budget cut is accumulate in ten years. According to this ratio, in 2021 we have to increase debt for another 15 to 21 trillion dollars and we only cut 2.4 trillion dollars debt in the period.
Feeling disappoint for that kind of budget cut Standard & Poor, downgrade U.S government’s credit rating. As a result, stock index in the world went down for more than 10% within one week. It looks like that rating services were without merciful when doing so. In this world only a few develop countries have debt equal to GDP. Italy’s has to pay more than 6% rate for their bonds as their debt is over 110% of their GDP. America pays less than 3% interest for their bonds when their debt ratio is 100% of their GDP. At this point we can’t say that rating services are not nice to the U.S government.
How much 15.8 trillion dollars equal to? Usually 5% net profit is business’s reasonable return. (In China the return is as low as 1.5%) GDP represent the total dollars amount that involve in a country’s economic activities. Assume that our 15 trillion dollars GDP has 5% net profit. If we have to pay what the Italy government pays for their debt, the 5% net profit we get from our GDP will be just enough to pay off the interest for our bonds. That means 15.8 trillion dollars debt can make us work from generation to generation for just pay the interests but never pay off the principle, unless we sell our land and assets. We are broken! That doesn’t mean we have no room to turn around. Our defense budget is 663.8 billion dollars in 2010 when our homeland is threaten by no country in this world. It means defense budget is unnecessary in this country. We once were attacked by the terrorists because we support Israel. If we change our stander we can get rid of the trouble in overnight.
Our Medicare and Medicaid cost combine together is close to 1.5 trillion dollars and that is 5.5% of our GDP. However, this kind of cost couldn’t make Americans’ live longer than people from the other developed countries. It means high percentage of medical cost in this country is unnecessary as well as most home care cost and nursing cost. On whole if we cut the above budget harsh we can cut over 1 trillion dollars a year.
Cut budget is the only way to solve our debt problem. Cutting budget might result in job reducing. We can let people share jobs by reducing working hours. We can encourage retirement by providing free housing project to people who are 55 years old. Building retirement homes can be considered as government’s investment with the process of creating jobs. The above policies might result in reducing income, reducing expenditure and reducing GDP. However, it can actually increase job opportunity without creating debt. We can even arrange jobs in the farms. Government’s final goal is to give people food, shelters and joys.
