Drowning In Debt

The United States government is drowning in debt (so is the citizenry but that is whole other mess) and the rating agencies are finally starting to figure it out. S&P cut the US's debt outlook from stable to negative. This is recognition of our worsening federal budget situation and the impending future explosion of costs.

Such a warning may be a precursor to lowering the US's credit rating from it's currently perfect AAA unless we are able to rein in rising costs. The US national debt is expected to approach or exceed 100% of our GDP (annual economic output) by late this year or early  next year by many estimates. At this point the country is technically insolvent from a fundamental stand-point. If the US were to lose it's perfect credit rating the result would likely be a spike in interest rates since most consumer rates are tied to government bond rates which would rise if our credit risk were perceived as increased. For those of you interested click here to view debt ratios and forecasts for most countries. You can also read more about S&P's change in a Wall Street Journal article by clicking here.

The current size of our deficit is truly astounding...recently in the news was the near government shut-down over the budget battle in which one of the major arguing points was whether to cut ~$30 billion in spending or ~$40 billion. Just to put that in perspective our projected deficit is ~$1.5 trillion so our leaders spent weeks arguing over what amounts to 2% of the budget problem on the low end and 2.67% on the high end...anyone see the problem with that?

If you want to get a real-time look at lot of the economic stats check out US Debt Clock.org