The Ten Trillion Dollar Gamble

Facing Reality

The US budget deficit in fiscal year 2010 was $1.3 trillion. That amount represents approximately all the debt America amassed from its founding in 1776 until 1984. So, in one year, the country overspent by the equivalent of roughly 200 years of boom, bust and war. Experts predict that between 2010 and 2019, the US will add an annual average of $900 billion to its obligations.

Despite former vice president Richard Cheney’s 2002 comment, “Reagan proved that deficits don’t matter,” the truth is they do matter. While deficits are nothing new in the American economy, these staggering numbers will change the global economic climate and trigger more taxes, greater budget cuts, falling entitlement benefits and increased interest rates. The 2009 and 2010 deficits account for 10% of US GDP, the largest proportion since World War II. Granted, the outsized spending went toward stabilizing a sluggish economy, but the more debt a nation incurs, the higher the chances that it will have destabilizing effects.

The US’s total debt now stands at $14 trillion, an astonishing 90% of GDP. When indebtedness reaches such a high percentage of a nation’s output, further...