by Audrey Howitt

Created on: May 18, 2010   Last Updated: May 19, 2010

The why of this question is complex and the answers are more so.  We, as a nation, are in midst of the worst economic downturn in this writer’s lifetime.  Up front, I need to state that I am not an economist. Therefore, the analysis that follows is mostly, just my opinion. Nonetheless, I am educated and I read the newspaper and like the rest of us, watch the evening news.

The very short answer to the question is that we spend more than we have to spend. We borrow to subsidize the purchase. In the extreme, we borrow to subsidize the payment of the debt originally incurred. When you look at the issue in this manner, it seems crazy-making to continue to incur and subsidize. So the relevant question is whether our debt is sustainable.

In a report issued by the International Monetary Fund (IMF) and reported in the Christian Science Monitor, the U.S. Debt crisis may be even worse than the current crisis in Greece. [i] According to the report, American debt has a much shorter average maturity—only 4.4 years. [ii]  This short maturity allows the U.S. to benefit from current lower interest rates, but poses risks in the longer run.  The U.S. debt is subject to the need to continually roll over the debt in capital markets at the then-existing interest rates. [iii]

The US carries a large, unsustainable debt over the long- term. This unsustainable debt makes the cost of borrowing higher and makes it difficult to find investors.  This has been the situation in Greece.  The US situation is not unlike that of Greece. [iv]

It is estimated that in 2010, the debt will be 94.27% of our Gross Domestic Product (GDP). [v]   So where has this money gone?  The numbers are so large as to seem unreal. Here is the breakdown[vi]:

Government Pensions $1.0 trillion

Government Health Care $1.1 trillion

Government Education $1.0 trillion

National Defense $0.9 trillion

Government Welfare $0.8 trillion

Other $1.7 trillion

Total Government Spending $6.5 trillion

Federal Deficit $1.6 trillion

So, with these amounts being spent, why do our elderly have to choose between food and the cost of prescriptions, why do we have so many who cannot afford basic health care for themselves and for their families, why are our educational systems in crisis, and why do we feel unsafe in the world at large? Although these questions must be reserved for another article, the questions posed are relevant to the discussion of what our spending is purchasing.

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