Yesterday, April 26, was Debt Day, and it was the earliest debt day ever. Debt Day is the symbolic day of the year that Congress runs out of money obtained normally through taxes and revenue, and the day that it has to begin financing its expenditures through debt. This year, it is far earlier than it has been in any time in our nation’s history, a little more than halfway through the government fiscal year which begins every October 1. In contrast, last fiscal year did not see debt day until August 3, over three months later.
Minority Leader John Boehner is pushing this point. Our nation cannot sustain this level of debt spending. Our biggest creditor, China, is beginning to get nervous over the amount of debt that we are planning on, and is slowly moving its holdings of U.S. Treasuries to gold. This will make it harder for the U.S. to finance its future debt, and will probably require intervention from the Federal Reserve to make it all look good on paper by having the Fed “buy treasuries” which basically amounts to printing money to finance our debt.
The unsustainable nature of the current spending spree that we are on has the potential to bring on an economic crisis that will make the current one look like a bump in the road, one of stagflation that will make the Carter administration look like the good old days. The last two major economic crisis’ were precipitated by the bursting of bubbles. In the late 1990s, it was the tech bubble. This crisis was precipitated by the bursting of the housing and credit bubbles. With a 25% bump in debt in the last year alone and no end in sight with Obama’s proposed budget, we are on the verge of a new bubble bursting, the government bubble.
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A politicians view is limited to the next election and not down the long road past that day. He doesn’t concern himself with the nations future only his political future. An old and sad story.