Notice these sobering words from The Wall Street Journal: “Never in the World Economic Forum’s 40-year history have business and political leaders gathered in Davos [Switzerland] with so many pressing issues to discuss” (“A World of Troubles,” Feb. 3, 2010, emphasis added throughout). Several of those pressing issues center on the global debt problem, and specifically that of the United States and the United Kingdom.
A number of disturbing newspaper and magazine headlines should grab our attention: “U.S. in Fiscal Peril With $12.1 Trillion Debt” (USA Today, Jan. 4, 2010); “Ocean of Debt Threatens Obama as He Forecasts Record £975 [billion, or $1.5 trillion] Deficit” (The Daily Telegraph, Feb. 2, 2010); “Tell Us the Truth About the Depth of Our [Britain’s] Debt Crisis” (The Sunday Telegraph, Sept. 20, 2009); “We Can Afford to Pile Up Debt, Says [British Prime Minister Gordon] Brown” (The Daily Telegraph, Feb. 3, 2010); “How Great Powers Fall: Steep Debt, Slow Growth and High Spending Kill Empires—and America Could Be Next” (Newsweek, Dec. 7, 2009).
The USA Today article simply states: “After $787 billion in stimulus spending and $707 billion in bank bailouts, 2010 is fast shaping up to be the year of the federal budget diet. Bipartisan support is growing in Congress for action to stabilize the nation’s bulging debt, which is now $12.1 trillion.” Influential fiscal experts and concerned politicians want decisive action, but there is no agreement on what needs to be done.
According to The Sunday Telegraph‘slead editorial about Britain’s debt crisis: “The numbers are horrendous: today the national debt stands at £804.4 billion [or $1.3 trillion], equivalent to more than £25,000 [or nearly $40,000] for every family in Britain. Interest payments are expected to increase by more than 11 per cent every year; by 2013-14, they will amount to £63.7 billion [$100 billion], or more than we now spend on defence and transport together.”
TheFeb. 3 Daily Telegraph article said that “Gordon Brown has insisted he was ‘right’ to run up a huge Government deficit and said that pushing the public finances deep into the red was essential to cope with the recent recession…The Government will spend £178 billion [around $280 billion] more than it raises in tax during the current financial year, a deficit equal to 12.6 per cent of the entire economy and larger than almost any other advanced economy.”
In the Newsweek cover piece, author Niall Ferguson focused on how “economic weakness is endangering [America’s] global power.” He further stated: “But if the United States succumbs to a fiscal crisis, as an increasing number of economic experts fear it may, then the entire balance of global economic power could shift.” Ferguson, a Harvard professor, indicated that a debt explosion usually ends up in a radical reduction in national defense spending.
This has already begun to happen in Britain. A Feb. 2 Daily Telegraph report stated: “Britain’s Armed Forces face inevitable cuts that will leave the country ‘dependent’ on allies [like France] to fight future conflicts…The country can no longer afford to fund current operations in Afghanistan” (“Budget Cuts ‘Will Leave Britain Reliant on War Allies’ ”).
Failure to balance the books inevitably leads to financial disaster, whether on a national, corporate or individual level, bringing on all the other thorny difficulties that flow from a lack of adequate funds. (Sources: The Daily Telegraph [London], The Wall Street Journal, USA Today, Newsweek.)