The politicians have gotten used to deficits over $1.2 trillion. They assume that the public — meaning Asian central bankers and the Federal Reserve — will continue to fund these deficits forever, at interest rates lower than at any time since the 1930s. The believe in free money.
But these IOUs are permanent. When rates climb, this debt will weigh heavily on economic growth.
It is already the third quarter of fiscal 2012. The deficit is above $1 trillion. The year ends on September 30.
We forget that fiscal 2008 was the first year in which the federal deficit was above $11 trillion. That was unthinkable in January 2008. It was reality by September.
Here are the numbers. On September 30, 2011, the federal debt (on budget — not Social Security and Medicare) was $14.8 trillion. On June 29, 2012, it was $15.8 trillion.
In fiscal 2007, according to the U.S. Treasury, the federal government’s debt increased $500,679,473,047.25. But that marked the last fiscal year in which the federal government’s debt did not increase by at least $1 trillion.
In fiscal 2008, the debt increased $1,017,071,524,650.01. In fiscal 2009, it increased $1,885,104,106,599.26. In fiscal 2010, it increased $1,651,794,027,380.04. And in fiscal 2011, it increased $1,228,717,297,665.36. . . .
At the close of business on Sept. 30, 2007–which marked the beginning of fiscal 2008–the total debt of the federal government stood at $9,007,653,372,262.48. At the close of business on July 19, it stood at $15,874,365,457,260.40–an increase of $6,866,712,084,997.92 in less than five years.
This is now unstoppable. Congress will not call a halt to it.
There will be a Great Default.