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Senate votes to increase debt ceiling $1.9 trillion – That’s 15%

More than a week ago, I told you about a Democrat proposal to increase the debt ceiling for the federal government by a whopping 15 percent from $12.4 trillion to $14.3 trillion dollars. The Senate just voted to go with the plan, and they voted exactly down party lines – 60 to 40.

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Democrats propose increasing debt ceiling a whopping 15%

Not so unbelievable news from Washington D.C. tonight, where Democrats in Congress are requesting – from themselves – they be allowed to increase the federal debt ceiling more than 15 percent, from 12.4 trillion to 14.3 trillion. What’s a couple more trillion ya know?

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Deficits are bad, but the real problem is spending

Another great featured video from the Cato Institute. Dan Mitchell uses an analogy I’ve used myself when discussing the United States deficit and debt, comparing it to a family getting a mortgage for a home. Mitchell is even using my “symptom of the disease” theme. I’m honored Dan …   😉

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More debt for you and your children

Our Congress is not content spending at record levels, it now intends to break even their record levels of spending. The result will be that, not you, but your children or grandchildren will saddled with the responsibility of paying back this debt. It is unconscionable really, criminal. Read more

Borrowing more than you can pay back – not a good idea

Looking for a loan? Mortgage lenders take a look at your debt to income ratio. In general, the more you earn the more you can borrow. How does the debt to income ratio look for the United States?

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Congressman Larson explains a few things

This is a video from Jan 29, 2009 . Yours truly had the distinct pleasure of getting to ask 1st District Congressman John Larson (D-Conn.) a couple of questions.

Basically he blames the Bush administration.  I was able to ask the exact same question today and he really didn’t answer the question. Nothing has changed since then. We still do not have full disclosure.

httpv://www.youtube.com/watch?v=M_6RUqEWGrw&feature=channel_page

In this next video Congressman Larson explains how we are going to pay back all of the money that we are borrowing from the world. If someone can interpret this that would be wonderful.

httpv://www.youtube.com/watch?v=JtOXGrSXvEQ

Wow – Bush Unveils $3.1 Trillion Budget for 2009

Can you believe this? Can you comprehend how much money one trillion dollars is? That’s 1,000 billion dollars. Now times that by more than three.

For reference, in 2002 we broke the two trillion dollar mark. That means – no matter how you look at it – the federal government has grown almost 36 percent in less than five years, and we’re estimating growth of more than 55 percent between 2002 and 2009.

For those interested, here’s a link to historical tables going back more than 100 years.

When you look at the data, take a look at the deficit or surplus each year. The last year that we ran a surplus was in 2001, but it’s important to note the deficit percentage as compared to the total spent. In the early to mid 80s, our deficits were bad (22 to 25 percent) in comparison to what they are now (6 to 9 percent).

Here is an analogy. If you made $150,000 per year, would it be acceptable to carry a $25,000 car loan. The percentage of debt would be about 17 percent. That means that if you made $300,000 per year, it would be acceptable to carry a debt (car loan) of about $50,000. Just because your debt load doubled, does not mean that it is a bad thing. You must compare that to your income.

That’s why the yearly deficit numbers don’t mean much on their own, you must compare that number to some other number. Below, I’ve compared to the budget, but in most cases it is compared as a percentage of GDP. Here is a good Cato Institute article on the subject. Maybe deficit spending is okay?

Since 1963, we have had 14 years when debt has been below 33 percent of GDP and 26 years when it has been higher. Conventional wisdom is that economic performance should have been better in the years when we had less relative debt, but the facts are the opposite. Real economic growth averaged 3.47 percent in the high debt years, which was almost 1 percent higher than the 2.59 percent average growth of the low debt years.

Unemployment was also lower in the high debt years averaging 5.65 percent as opposed to 6.43 percent in the low debt years. Inflation averaged a whopping 7.6 percent in the low debt years, almost 3 times as high as the average 2.95 percent of the high debt years.

Here is some information I put together from the historical data. Note that the budget is listed in trillions of dollars. The Budget column indicates the deficit percentage as compared to the total outlays of the budget. 2008 and 2009 data points are estimates.

On a final note, there is a difference between yearly deficits and the national debt. In total, it’s estimated that the U.S. has a “mortgage” of about $5.1 trillion dollars (national debt). That certainly is a lot of cash, but since the government is taking in about $2.6 trillion per year how does it look now? Maybe compare that to your own debt load and see how the percentages work out?