Visualizing Our Debt Issues

Edon Shaqiri
President

After months of negotiating and political posturing in Washington, our elected officials were finally able to pass a debt ceiling bill on Tuesday. Despite the panic, an agreement was finally reach, a crisis of default was averted and a downgrade was not necessary. Congress now has about a week or so left to a pick a joint panel, six each by Democrats and Republicans, who will be responsible in recommending how to best distribute the $1.8 trillion in spending cuts.  So, herein lies the problem: all that this committee will discuss is our public spending problem – which I absolutely agree in calling it a problem. However, what this committee fails to address is the balancing factor of revenue – which as a result of tax-cuts has really not been a factor in contributing to the recovery…if there was ever one.

To illustrate as to what I mean by this opinion, I offer a chart using data files from the Federal Reserve Economic Data (FRED). Current government receipts = revenues. The art of balancing a budget requires discipline and commitment to bring both lines closer to one another. Ignoring  the balancing factor of revenue and focusing solely on spending, gives you a clue that these are sound political decisions by our Congress rather than economic.

*** Approximately 3-4 hrs after this post entry, Standard and Poor's, one of the three main credit rating agencies, downgraded US Treasury bonds from AAA status to AA+.