Plenty of blame

By The Hawk Eye

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Albert Einstein is credited with observing compound interest as the most powerful force in the universe.

“He who understands it, earns it; he who doesn't, pays it,” he continued.

Right now, America understands compound interest yet is paying for it, too.

At $15.595 trillion, U.S. debt this year exceeded the country's Gross Domestic Product. To be sure, that's an alarming figure. Republicans made hay of it at their convention last week - as well they should.

In 2000, the first year of President George W. Bush's term, debt as it compared to GDP swung from plus 57.7 percent to 57.8 percent in the red. Then we cut taxes twice and went to war twice.

The first war in Afghanistan has cost us $561 billion and promises to remain expensive even after troops leave in 2014. Meanwhile the war in Iraq, now generally viewed as wholly unnecessary, cost $806 billion and still requires massive amounts of money.

All of it's borrowed.

Debt piled up during Bush's administration from 57.8 percent of GDP to 74.1 percent. Anyone familiar with how compounding interest works knows how that curve will soar - especially when expenses continue to exceed income.

In the past four years, those numbers have marched steadily and unsurprisingly upward: 86.4, 95.1, 98.7 and 101.7 percent of GDP. (Japan's debt-to-GDP ratio is 220 percent, and see where that country is.)

Fortunately, that debt, when calculated on a per capita basis - that portion that could be assigned to each citizen - has been bent downward. The year-over-year figure has gone from 14.1 percent to 12.6 percent to 7.1 percent.

The week before the Republicans gathered, the Congressional Budget Office issued a dire financial forecast should $500 billion in scheduled fiscal changes go into effect at the end of the year. In measured language, the CBO said the country is headed toward a fiscal cliff if all the Bush-era tax cuts are allowed to end and across-the-board cuts permitted to the federal budget - brought on by a bit of budget jujitsu because the White House and Congress could not agree on a debt ceiling - are enacted.

There's plenty of blame to go around. In the parlance of the Vietnam era, the United States has bought bushel baskets of both guns and butter since the turn of the millennium. Looking back, Democrats and Republicans both failed to recognize where the country was going.

Cutting taxes seemed like a good idea when the Treasury was full. But that was before 9/11, and the budget was not tweaked when the country marched off to war. Then the ultra-expensive bank meltdown hit.

Republicans last week combined a bit of political amnesia with a new-found zeal for budget discipline. This week, Democrats will try to work around the fact in Charlotte, N.C., monetary restraints will limit what the party can do.

The fact Barack Obama and Mitt Romney are running neck and neck shows Americans are more savvy about how we arrived at this point than politicians give them credit.

If politicians acknowledged that reality, it'd unleash a power the likes Einstein never saw - and we'll need that kind of energy to tame this debt tiger.

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