[Letters] America at debt’s door: A primer

The economic center of gravity is shifting from West to East as America faces economic problems and China remains the world’s fastest-growing major economy. Do these events signify the eventual end of American predominance? Since embracing market reforms in 1978, China’s economy has averaged over 9.5 percent growth annually. In the last three decades, it has grown tenfold. It overtook the economies of Great Britain and France in 2005, Germany in 2007 and Japan in 2010. China’s economy is predicted to overtake America’s economy within the next decade or two.

These predictions seem reasonable since China’s economy was one-eighth as large as America’s economy a decade ago and now it’s one-third as large. While China continues its long march of uninterrupted economic ascent, America’s economy is faltering.

Almost every year, the American federal government spends more money than it collects in taxes. For the just-finished 2010 budget year, it spent roughly $1.3 trillion more than it collected, which is the second-largest deficit in American history. The largest was the $1.4 trillion deficit in 2009. Both occurred during the Obama administration.

Except during World War II, the federal debt held by the public has never exceeded 50 percent of the nation’s annual economic output.

That is until now. The federal debt held by the public currently represents 62 percent of the nation’s annual economic output. And it’s headed even higher. The Congressional Budget Office estimates it will reach 80 percent by 2035 if current laws prevail. However, if widely expected changes to current law are made, it will reach 90 percent by 2020, 110 percent by 2025 and 180 percent by 2035.

Under either scenario, the federal debt held by the public will grow faster than the nation’s annual economic output. The more it grows, the more the government will have to borrow. With the government having to pay interest on what it borrows, the added interest will make the debt even larger.

The estimated $600 billion in interest on the federal debt in 2012 is “one year’s worth of defense budget,” said U.S. Admiral Mike Mullen, chairman of the Joint Chiefs of Staff. He predicted that the defense budget will eventually be cut to facilitate the “wave of debt.” U.S. Defense Secretary Robert Gates recently said, “We can’t have a strong military if we have a weak economy.”

The weakening of American military power would not just affect America, but it would also affect those nations that rely on it for their security.

A large body of historical evidence supports the concept that empires rise or fall based on their economies. Take the British Empire, for example. Over a century ago, it expanded from economic to military to political power. At its height, the British Empire controlled roughly a quarter of the world’s land surface. However, Britain’s global dominance ended when its economy crumbled.

We are not exempt. In every era, these fiscal issues are questions of national security and success. American predominance is at debt’s door. It will soon enter if policies aren’t changed.

Bill Costello, M.Ed., the president of U.S.-based Making Minds Matter