Perot Charts » National Debt

U.S. National Debt 2008

PerotCharts — Sun, 02 Nov 2008 18:31:11 +0000

Between September and October 2008, the Total U.S. National Debt increased by nearly one trillion dollars, or about 10% of the outstanding debt. Most of this increase is due to public borrowing to finance the Wall Street Bailout plan. The additional borrowing on top of the mandatory increases in programs such as Social Security (which will increase payout by 5.8% in January of 2009) represents a significant loss in financial flexibility which makes the problem of persistent deficit spending even more difficult to solve.

At the current rate, the national debt is increasing by nearly 4 billion dollars every day! See our National Debt Clock.

Revised and Simplified Presentation on Debt Issues

PerotCharts — Sun, 02 Nov 2008 16:33:09 +0000

We have posted a revised and simplified (shorter) presentation on the financial challenges facing the United States at http://perotcharts.com/issues/. Let us know what you think. Many of the changes were driven by comments from our readers.

Please tell your friends and family about this presentation by emailing them a link to it. The more people we can educate on these issues the better.

Finally, you can express your concern by sending an email to your elected officials at our legislative action center.

The Main Street Rescue Plan

PerotCharts — Sun, 28 Sep 2008 06:52:13 +0000

The Main Street Rescue Plan

Congress will be voting on a revised Wall Street Bailout Plan as early as October 1, 2008. If you believe that Congress should be focusing on Main Street first, then please click here to send an email to your elected officials telling them you don’t want the government spending billions of dollars on bad loans.

Thanks to all who sent email to their elected officials. As you know, the bailout bill passed although it did contain some of the provisions in the Main Street Rescue Plan. We will be expanding our campaign to educate our elected officials on the consquences of run away debt and our unfunded social obligations in the near future.

Phase One – Immediate Action by U.S. Congress

1. Securities and Exchange Commission

Mandate that the SEC:

Suspend its “mark-to-market” accounting regulations that are causing the write-down of bank assets to fire-sale prices, and thereby contracting the supply of available investment capital.
Tightly restrict short sales of financial stocks.

2. Federal Deposit Insurance Corporation

Mandate that the FDIC:

Declare a national emergency during which time the FDIC will back depositors and general creditors of banks that fail and resolve those collapses in a way that does not cost depositors, such as selling deposits and loans of the failed institution to another institution.
Reconstitute the FDIC’s “net worth certificate” (NWC) program that Congress created in the 1980s for the savings and loan crisis of that era. The NWC required no federal subsidy or cash outlay. Under the NWC, the FDIC bought subordinated debentures in the bank and issued FDIC notes to the bank, with the interest being the exact same on both instruments. Under this program, the FDIC assesses the financial condition of banks and shores up weak ones that can survive if given time to resolve their problems and merges/liquidates those too weak for the NWC program. Under the NWC program, the FDIC will provide strict supervision of participating banks, including the employment of key personnel and their compensation, until the crisis has passed. Again, no federal subsidies or outlays are required.
Declare a 120-day moratorium on payment of dividends by banks. Executives of banks that need capital often worry that failing to pay dividends is a sign of financial instability. A temporary ban across-the-board will end fears and give FDIC time to strengthen banks’ capital base.
Expand FDIC insurance coverage to other financial institutions, including hedge funds, placed under federal regulation.

3. Stabilize Owner-Occupied Homes

Declare a 120-day moratorium on mortgage foreclosures. This will (a) keep families in their homes while components of the broader plan are put in place and the real economy is revived; (b) better ensure that the property does not fall into disrepair; and (c) reduce the decline in housing values created by unoccupied, foreclosed homes.
Devise a post-moratorium program to do work out plans for owner-occupied homes, including federal cash subsidies for owners that can pay for their homes if given time to financially survive this crisis.
Amend federal law so that federal bankruptcy judges are able to modify the terms of mortgages of homeowners in bankruptcy and thus give them more time to work through their financial problems and keep their homes.

4. Share Rescue Profits with U.S. Taxpayers

Whenever the government makes a loan or an equity investment in a distressed financial institution, such as the AIG deal, the public gets a share of any future recovery profits.
Create a true “Social Security Lockbox” for the warrants and equity the federal government acquires as part of this financial rescue. The goal is not long-term federal ownership, but to assist these organizations in returning to a sound operation and then make a prudent sale of the public equity.
Restrict the investment of those funds to AAA-rated state and local infrastructure bonds, which provide safe, long-term investments that will stimulate the real economy, create new jobs, and fiscally strengthen the Social Security System.

5. Oversight

Create an independent agency/board to oversee and manage the non-FDIC/SEC portions of the Rescue Plan and report to Congress on a regular basis. The Board would consist of:

Secretary of Treasury (Chair).
Chairman of the Federal Reserve Board,
Chairman of the FDIC,
Chairman of the SEC,
Comptroller General of the United States,
One appointee by each of the Majority and Minority Leaders of the House of Representatives and the U.S. Senate.

Create a new Joint Committee of Congress to oversee the plan and provide recommendations to Congress. The new Joint Committee would consist of representatives from all standing committees with partial jurisdiction for resolving this financial crisis. The goal is to involve all relevant committees in this rescue plan.

6. Create an Emergency Financial Crimes Office in the Department of Justice

The mission of this unit is to investigate any criminal acts that led to this crisis, hold the guilty accountable, and disgorge assets from individuals and institutions found guilty.
The head of the Office will be an experienced, non-political career prosecutor appointed by the President and confirmed by the U.S. Senate.
The Congress will provide sufficient funds to staff the Office with qualified attorneys and the necessary support staff of accountants and investigators.

Phase Two – Action by Congress Post-Election

7. Reinstitute a modernized Glass-Steagall Act, which covers and regulates all financial institutions including hedge funds

The goal is to restore prudence and accountability to the U.S. financial system through appropriate regulation.
Oversight of the financial rescue.

The Next President Will be a Slave to Bush Administration Fiscal Woes

PerotCharts — Wed, 13 Aug 2008 18:41:45 +0000

The following opinion by Jack Z. Smith of the Ft. Worth Star-Telegram was published on Friday, August 8, 2008:

The next president will be a slave to Bush administration fiscal woes

By Jack Z. Smith
jzsmith@star-telegram.com

The next president, whether it be Republican John McCain or Democrat Barack Obama, will be in handcuffs as he parades into the White House after his Jan. 20 inauguration.

He won’t be physically manacled. But he will be fiscally handcuffed from Day One as a result of the ideologically driven foolishness and sloppy excesses of President George W. Bush’s administration.
The White House is projecting a record federal budget deficit of $482 billion for the 2009 fiscal year that begins Oct. 1. Former Bush administration Treasury Secretary Paul O’Neill predicts a “mind-boggling number… upward of $500 billion.”

For the current fiscal year, the White House forecasts a $389 billion deficit.

Longtime budget hawk and former presidential candidate Ross Perot Sr. of Dallas notes that the national debt of nearly $9.6 trillion “is increasing by over one billion dollars every day.”

Perot’s observation is on a video on his new Web site, www.perotcharts.com. On it, he also offers this sobering observation: “We are leaving our children and grandchildren with a burden they cannot possibly manage.”

That is Bush’s sad legacy.

As a father and grandfather, it rankles me.

Oh, but Bush — the nation’s first MBA president, mind you — had such grand plans! His tax cuts for the rich would foster economic growth and job creation, resulting in more tax revenues, and everything would be rosy. The string of budget surpluses rung up by the Clinton administration would continue unabated.

But look where we are in the twilight of Bush’s tenure. America has experienced seven straight months of job losses. The housing crisis is the worst since the Great Depression. Energy and food prices have soared. An almost-anything-goes regulatory approach has produced an epidemic of bad subprime loans, spiraling credit-card debt and a tsunami of property foreclosures and bankruptcy filings.

The wages of many Americans aren’t keeping up with inflation. Millions of middle-class households from Florida to California have seen their net worth (assets minus liabilities) wither as a result of falling home values, higher personal debt and a shrinking 401(k) hammered by a declining stock market.

Republicans’ once-logical claim to being the party of small government has been eroded by Bush’s presidency. While the Bush tax cuts continue to restrict government revenues, spending has soared for entitlement programs such as Social Security and Medicare (including a costly new prescription drug program), defense, education and other departments.

Interest payments on the national debt totaled an enormous $377.3 billion during the first nine months of the current fiscal year — the fourth-highest spending category in the budget.

Meanwhile, Bush and Congress have failed to address the scary long-term funding shortfalls facing Social Security and Medicare.

That’s the biggest reason for Perot lamenting about “leaving our children and grandchildren with a burden they cannot possibly manage.”

Bush’s fiscal irresponsibility will handcuff the next president by limiting his options.

The new guy will have to spend much of his time just mopping up the mess.

Disappointingly, the policy positions espoused by McCain and Obama don’t provide the degree of fiscal sobriety that Washington must embrace. Neither candidate can deliver on all his promises, while simultaneously shrinking the deficits and meaningfully addressing Social Security and Medicare.

If you want the unvarnished truth about our fiscal foundering in Washington, you’d be better advised to turn to the Web sites of such budget watchdogs as the Concord Coalition or Perot.

McCain and Obama apparently don’t believe that they can get elected by fully prescribing the bitter medicinal cocktail — higher taxes and reduced spending — needed to cure the ills that Bush has foisted upon us.

Storms on the Horizon

PerotCharts — Wed, 04 Jun 2008 03:37:47 +0000

Storms on the Horizon
Remarks before the Commonwealth Club of California

by Richard W. Fisher
San Francisco, California
May 28, 2008

Richard W. Fisher is the President and CEO of the Federal Reserve Bank of Dallas, one of the twelve Federal Reserve Banks of the Federal Reserve System. Mr. Fisher currently serves as a member of the Federal Open Market Committee, which is the most important monetary policymaking body of the Federal Reserve System. It is responsible for formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. In this presentation, Mr. Fisher steps outside his role as a central banker to focus on fiscal policy.

An excerpt of the speech is set forth below. For the complete speech, click here.

I see a frightful storm brewing in the form of untethered government debt. I choose the words—“frightful storm”—deliberately to avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal situation of the federal government will be unimaginably more devastating to our economic prosperity than the subprime debacle and the recent debauching of credit markets that we are now working so hard to correct.

You might wonder why a central banker would be concerned with fiscal matters. Fiscal policy is, after all, the responsibility of the Congress, not the Federal Reserve. Congress, and Congress alone, has the power to tax and spend. From this monetary policymaker’s point of view, though, deficits matter for what we do at the Fed. There are many reasons why. Economists have found that structural deficits raise long-run interest rates, complicating the Fed’s dual mandate to develop a monetary policy that promotes sustainable, noninflationary growth. The even more disturbing dark and dirty secret about deficits—especially when they careen out of control—is that they create political pressure on central bankers to adopt looser monetary policy down the road.

The Growing National Debt Combined 1968 – 2007

PerotCharts — Thu, 22 May 2008 01:12:53 +0000

This chart illustrates the magnitude of the debt that is typically quoted in the media. It is far too time-consuming (as illustrated in the preceding explanation) for a reporter to explain the distinction between the two components, and it makes for better headlines to say that the national debt is almost $10 trillion. The $4 trillion number is useful, however, in that it serves as a reminder that the United States has made a huge commitment to Social Security recipients, Medicare recipients and other beneficiaries in the future. But as shown later, this commitment is far larger than $4 trillion.

The Growing National Debt Intragovernmental Holdings 1968 – 2007

PerotCharts — Thu, 22 May 2008 01:10:39 +0000

Intragovernmental Holdings is the name given to a method that is used to keep track of money that the government has borrowed from several government agencies—the primary one of which is the Social Security Administration. This gets somewhat complicated, so for the moment just think in terms of a married couple where the wife (the Social Security Administration in this case) has a job that provides a steady source of income (Social Security and Medicare payments from individuals and employers). The husband (the remaining parts of the federal government) borrows every cent that the wife makes, and gives her an IOU each time. He also promises to pay interest on the money that he has borrowed. And he agrees to pay for all of the things that she “buys” (payments to Social Security beneficiaries, in this example), which gets counted as an offset to the amount that he owes her.

In most years, the husband and wife spend more than both of them together make, so the husband borrows money from friends. So far, his friends continue to loan him enough money to keep him and his wife afloat. Both the debt to his wife (call it Intraspousal Holdings) and the debt he owes his friends (the Public) are growing. However, to include Intraspousal Holdings in a list of the husband’s liabilities is artificial in one sense, because when the husband and wife are considered as one entity, they only owe the amount that is payable to the outside friends. Nevertheless, in the interest of full disclosure, the husband makes it known that he owes both his friends and his wife a lot of money ($5 trillion to his friends and $4 trillion to his wife).

The Intragovernmental Holdings account is also equivalent to the so-called “trust funds” for Social Security, Medicare and several other programs that are handled in a similar manner. However, the only assets held by these “trust funds” consist of the IOUs given by the U.S. government as it “borrows” money from them. For practical purposes, the federal government treats Social Security and Medicare receipts as another source of taxes—second only in size to individual income taxes—that get spent each year.

The Growing National Debt Debt Held by the Public 1968 – 2007

PerotCharts — Thu, 22 May 2008 01:08:22 +0000

This is the cumulative amount of money that the government has borrowed from outside sources to meet its obligations during the years that it runs deficits. Debt Held by the Public includes domestic buyers, such as mutual funds, state and local governments, Federal Reserve banks, commercial banks, insurance companies, and individuals, as well as private foreign entities and central banks of foreign countries. Of the $5.1 trillion in outstanding public debt at the end of 2007, domestic investors owned 55 percent ($2.8 trillion) and foreign investors held 45 percent ($2.2 trillion). When the government runs surpluses, the debt gets paid down as can be seen from the trough in the late 1990s.

But wait a minute! All of the so-called “debt clocks” show that the national debt is now in excess of $9 trillion. Where is the $4 trillion discrepancy? Answer: See the next two charts (Growing National Debt: Intragovernmental Holdings and The Growing National Debt: Combined).

David M. Walker on America’s Financial Crisis

PerotCharts — Tue, 29 Apr 2008 21:48:08 +0000

David M. Walker, former Comptroller General of the United States, speaks on the Nation’s Budget Crisis.

Part 1:

Part 2:

David M. Walker on the Nation’s Budget Crisis

PerotCharts — Tue, 29 Apr 2008 21:45:34 +0000

David M. Walker, former Comptroller General of the United States, speaks on the Nation’s Budget Crisis.