Food for Thought
What number is 10,217,023,029,529? No, it’s not the largest known prime number recently discovered by mathematicians using powerful computers. It was the amount of the gross national debt at the moment I wrote the number and in the meantime it has grown by almost $10 million. If you are like me and have been trying to make sense of all the big numbers being thrown around these days, it’s nearly impossible. Thanks to my good friend Gray Maxwell, a senior US Senate staffer on Capitol Hill, I have a way to bring the enormity of the situation home by casting the numbers in terms of our city and as individual citizens and thinking about what we could buy with that money.
In order to easily understand these numbers I will round them off. I will use a figure of 300 million for the US population and 1 million for the population of San Jose. So, for instance, the national debt figure will round off to $10.2 trillion, making San Jose’s share $34 billion which is $34,000 for each and every one of us—man, woman and child. If you are a family of four, that equals $136,000 for your family. There’s more. Because of deficit spending, the debt is rising by an average of $3.6 billion each day or more than $1 trillion per year, or about 10% of the total. So at the current rate, in the coming year San Jose’s share of the increase will be $3.4 billion or $3,400 each. (This figure includes the interest on the debt.)
The size of our national debt has doubled since George W. Bush took office. The 50 percent of the current debt that that figure represents is equal to the amount financed by the Chinese government. That means each of us is indebted to the Chinese to the tune of $17,000.
The current ratio of national debt to Gross Domestic Product (GDP) is 70 percent and rising. It was at its lowest in the last 50 years during the Carter administration in 1980 when it stood at just above 30 percent. It rose steeply during the Reagan and Bush I presidencies to 68 percent because of deficit spending. During the budget surpluses of the Clinton presidency, it fell to below 60 percent, and has steeply increased again since Bush II took office. The budget deficit is nearly $600 billion per year now—$2 billion for San Jose or $2,000 per person.
So, how did this happen?
First of all, there is the war in Iraq. With projected spending in the coming year, the war has cost the taxpayers nearly $800 billion so far. San Jose’s share is $2.6 billion or $2,600 per person. Further costs of military activity, veteran’s benefits and rebuilding the infrastructure of Iraq that we have destroyed has been estimated to add another $2 trillion in the foreseeable future. The $3 trillion price tag for Bush’s war will end up costing San Jose citizens $10 billion or $10,000 each.
The tax cuts for the wealthy are by far responsible for the biggest slice of the debt increase. They have added almost $3 trillion to the national debt and account for nearly half of the budget deficit. That’s another $10 billion for San Jose or $10,000 per person. The sort of people who got these tax cuts would be like Lehman Brothers CEO Richard Fuld who took home half a billion dollars while Bush was president. This is the guy who unapologetically testified before Congress this week and told how Lehman Brothers paid out $20 million in executive bonuses FIVE DAYS before declaring bankruptcy. Or AIG CEO Martin Sullivan who took his senior executives on a weekend junket to a luxury spa that cost $500,000 a few days after being taken over by the US government—paid for by us, the taxpayers.
As we all know by now, our economy is tanking because of corruption, deregulation and lack of responsible oversight by the Treasury Department, White House and Congress. We have just been asked to pay a $700 billion bailout for Wall Street. That’s a $2.3 billion cost to San Jose citizens or $2,300 each. Since this has had little impact on the faltering economy, it seems likely that we will be asked for more. Where is it going to come from? If you are wondering what $700 billion could pay for, try these as a for-instance: This amount would allow us to repair all of our nation’s 77,000 deteriorated bridges and still have $519 billion to spend; or it would allow us to rebuild all of our nation’s 33,000 deteriorating schools and still have $664 billion to spend; or it would pay for 27 million, four-year college scholarships. Think what we could do with our $2.3 billion share in our city.
The reason for this bailout has been given as the subprime mortgage scams perpetrated by Wall Street. I have some figures on that. There are $1.5 trillion in total subprime mortgages. That figure represents a small 6.8 percent of all outstanding loans. The default rate has reached 25 percent, or a value of $375 billion. (Since we are being asked to cover $700 billion, I am assuming the Treasury is projecting a nearly 50 percent total default on these loans. Something smells fishy in this deal. Why don’t we just help the defaulters as necessary?)
In the past year, we Americans have lost $2 trillion from our retirement funds, 401Ks and the like. We have seen the value of our homes decrease by more than 25 percent and even a great deal more in some parts of the country. Consumer prices have increased dramatically and health insurance costs have doubled in the last eight years. I know that I am spending twice as much for gas and 30 percent more for groceries this year than I did last year. If you have tried to cushion yourself with savings like I have, the interest you are getting is miniscule and, given the true rate of inflation, very costly. The government official rate of inflation of about 5 percent and unemployment rate of 6 percent are hogwash. I don’t think anyone knows what the true inflation rate is. The new standard of establishing a national unemployment figure is to count only those registered on the unemployment rolls. In doesn’t count the long term unemployed or those who have given up. Measured by the old standards, unemployment is now nearly 15 percent. By that measure, we are in a depression.
If you are seriously worried about the current situation and are thinking of taking your money out of the bank and stashing it under the mattress, I don’t blame you. I have thought of that too. Unfortunately, we will have to think again. Here are the numbers on that:
There are deposits in US banks of somewhere around $5 trillion. There is a total $829 billion in cash Federal Reserve Notes in circulation in the world; typically two-thirds of that is outside the country at any one time. So that means there is less than $280 billion in total cash in the entire USA to cover $5 trillion in deposits. That is less than 1 billion dollars of cash in San Jose or less than $1,000 for each person. If you are worried about collapsing banks and feel reassured that the FDIC insurance is able to cover everyone up to $250,000, think about this: There is a total FDIC insurance fund of cash on deposit of $55 billion. That is barely more than 1 percent of total cash deposits in the country.
I don’t know about you, but I look at these figures and it seems clear that if we don’t come up with a solution fast we are in deep shit. Our country is on the verge of bankruptcy and our economy is collapsing and taking the rest of the world with it. This week has seen the collapse of the Icelandic economy and the central banks of the EU intervening in the crisis there. The dominant German economy is in a terrible state. Yesterday the British government nationalized a large part of their banking system which is what I believe we ought to be doing here and probably will have to do in the near future.
There are two bits of good news in the worst-case scenario. One, the war in Iraq will be over and the soldiers will be coming home because there will be no money to pay for war. Unfortunately, they may not have a job to come home to. Two, it means the end of the corrupt, unregulated capitalism that brought us to this point and that crooks like Richard Fuld and Martin Sullivan might go to prison.
Oh, and while I wrote this piece, the national debt increased by
$859,557, 892. That’s $2.87 million for San Jose. Your share of that is $2.87.