So If Your Friends Jumped Off A Bridge…
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Would you jump?
It’s the infamous question posed to nearly every child and adolescent after being caught engaging in reckless or risky antics: “If your friends jumped off a bridge, would you jump off the bridge, too?”
We have all heard it. But today it seems that simple logic of thinking independently and watching out for your own well-being, despite what the group is doing, may not have been such a universal lesson. There are leaders in our country who are bringing the United States to the edge of a bridge, and urging us to jump. The only reassurance we have is that other countries are following suit. What is this bridge we are teetering on the edge of? Economic and financial stability. The scariest part: we don’t know how far the fall is.
You don’t have to be an economist to comprehend that if you spend more than you have, you go into debt. Too much debt, and there are serious long-term consequences, for any institution.
Countries have two measurements of debt: the budget deficit and the national debt. If the federal government spends more than it collects in taxes for that fiscal year, the government runs a budget deficit. The national debt is the running total of what a country owes. Budget surpluses (when tax revenues are greater than government expenditures) decrease the national debt. Likewise, budget deficits increase it.
A country operates similarly to that of a corporation, in that it can roll over its debt and finance accordingly. With that being the case, is there really such a thing as too much national debt? If we continue to embrace national policies of debt accumulation, how much risk are we actually inheriting? How far could the fall really be?
Well, let’s take a look at few of our fellow bridge-jumpers to see who we are in company with. Let us look at those whose government policies mirror our own of buy, expand, spend now, and pay later.
Iceland: October 2008 was not only the beginning of the U.S. recession; it also marked a financial collapse so severe in Iceland it was referred to as a national bankruptcy. The government of Iceland shut down the stock market on October 9 and nationalized its three largest banks which were defaulting on $62 billion of foreign debt. Due to the collapse of the banking sector, Iceland’s currency – the krona – dropped in value by 50% in one week. Inflation rose to over 12%; the stock exchange fell 89%; half the country’s businesses became technically insolvent; and 15% of Icelanders fell into negative equity.
Iceland had to turn to the International Monetary Fund (or IMF), which is an extension of the United Nations, for a bailout. They were the first industrialized country to do so in over 30 years. The previous industrialized country was Britain.
The IMF is now in complete control of Iceland’s monetary and fiscal policies, in exchange for a $10 billion loan.
Dubai: On Wednesday, November 25th, Dubai’s main development organization, Dubai World, released a statement asking creditors for a “standstill” on paying back its $60 billion debt until May, at least. The request puts at risk up to $80 billion in debt linked to Dubai, and could result in the largest country debt default since Argentina in 2002. This city-state of the United Arab Emirates spent billions during an expansion period to build opulent resorts, man-made islands, and the world’s tallest building, The Burj Dubai.
United Kingdom: As of July 2009, the U.K.’s national debt, as a percentage of its GDP, stands at 57%, after the bailouts for their financial sector. This brings their public sector debt to over 800 billion Euros. They will pay 35 billion Euros in 2009 in interest payments, which is nearly the amount of their entire defense budget.
Daniel Hannan is a British citizen and a Member of the European Parliament (MEP), which is one of the two legislative bodies in the European Union. In this video he is confronting U.K. Prime Minister Gordon Brown over the condition of the U.K. as it stood in March of this year as well as the country’s monetary policies.
Daniel Hannan MEP: The devalued Prime Minister of a devalued Government
United States: A brief overview of our current economic state:
• The national debt of the U.S. government reached $12 trillion this month. This amount averages out to every American owing around $39,000. The national debt as a percentage of our GDP is close to 90%.
• In ten years analysts predict the U.S. will be paying at least $700 billion in interest payments per year. In comparison, just $500 billion a year in interest would total more than the combined federal budgets of 2009 for education, energy, homeland security and the wars in Iraq and Afghanistan.
• The New York Times reported November 23 that the White House predicts it will need to borrow an additional $3.4 trillion by 2013.
• China holds 24% of our debt, while Japan holds 21%.
• The Congressional Budget Office predicts negative economic growth over the next 10 years due to the national debt burden.
It is now indisputably clear the United States has charted a course of financial unsustainability. Projections show the trillions only increasing in the future. Those who are making these decisions will have the fortune of not living to see the fruition of economic impact. My generation, and the ones to follow, will have the misfortune of not only being burdened with supporting an already ailing social security system as baby boomers start collecting payments, but will also be burdened with trillions of dollars of debt and the billions of dollars of that debt’s interest.
The picture is grim, but it is not too late. November 2010 are the midterm elections, and we have the power to change the direction of this country. We have a history of leadership, and it’s time we showed some backbone. Let the nations of the world throw out bailouts like pennies. Let them jump off the bridge. We have overcome too much, sacrificed too many lives in defense of liberty to be defeated by our own undoing; to be defeated by financial irresponsibility on the most unprecedented of scales.
America, let’s stay on the bridge.
Stefanie L. Back is a Finance Major at the University of Alabama and an Intern for Newt Gingrich Communications.
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I am a student from FSU. Great article. Thanks for the breakdown.
Very well written. Good job Stefanie.
Interesting article, yet respectfully I would like to know whether you would like to start making cuts in our Defense Dept, Education or other???
I agree minus the interesting part. This is a rhetoric article with no deep thought at all. As for your question I doubt this writer can answer it. Figures. I read the Rachel Campos Duffy article not long ago and it seems this site can’t find an intelligent woman to save their life. If any of you know of one please share so I can enjoy a good read.
What a rude comment. This is an article written by a student and I think this young lady has done an excellent job at explaining our economic state in a clear, thought-out way everyone can understand.
Rachel’s article was fantastic and not only featured on this site, but on several other blogs as well, including CNNs.
I am intrigued to see what an intelligent woman such as yourself can put together. Why dont you submit one and we’ll see what readers have to say.
Great article Stefanie. One correction, the British have not yet switched to Euros, they still use the British Pound. But your point remains the same. Good Job.
I’m soooo proud of you Steph! Great article! : )
Josue please whip the brown off your nose. Rachel is not taken seriously by real intellectuals. I don’t care where her articles are featured. She’s a woman INfamous for acting like a fool on MTV and kissing a booger eater. As for this “student” she should stick to submitting papers at school. My opinion and it’s as valid as yours.
Gabriela, you say that the columnist is “a woman INfamous for acting like a fool on MTV and kissing a booger eater!!!” Is there a video of this so we can see if it really happened?
I didn’t say the columnist. Why don’t you read!
“Rachel is not taken seriously by real intellectuals. I don’t care where her articles are featured. She’s a woman INfamous for acting like a fool on MTV and kissing a booger eater. As for this “student” she should stick to submitting papers at school. My opinion and it’s as valid as yours.”
Student being the columnist since you need help.
There you go, now read it slowly! Have you lived under a rock? Get a clue buddy.
And I do mean “whip” and not wipe as it is stuck on your nose. You better use a chainsaw.
Wow! Someone get this scorned woman a drink. Seguro esta Gabrielaes una tipa llena de complejos
Gabriela, Rachel is also a columnist, and you are a pretty bad blogger. Your comments are truly rhetoric ones with no deep thought at all. I would recommend some pizza while watching a recorded episode of “The View”. Take some Advil as well.
Oye Gabriela, vas a mandar el vídeo ese para verlo o te grabas tú misma para verte? No te enfades tanto que es Navidad.
Translation,
Hey Gabriela, are you going to send us the video to watch it or are you going to record yourself so we can see you? And do not get so angry. It is Christmas time.
Gabriela, your comments are quite negative. This article is excellent. Maybe you would like to write for The Americano but you did not make the list of minimum qualifications…
How cute, you guys came out of the cracks for your “friends” who don’t know you exist.
Dear, what are the “minimum qualifications”? Do tell. According to the bio line she’s still in school and it doesn’t say graduate so not very high marks there. As for Rachel the “columnist”, thanks for the laugh. You all have a great night now and don’t let my comments about your Messiahs upset you.
Hey Gabriela, do you really exist or are you Gabriela No Last Name, or are you the sister of Madam Blavatsky? Ah… you don´t know who she is… Sleep well!
You should grab a bite in a gas station and continue posting until tomorrow. If you continue like this, you will make it to college, my dear Gabriela.
Gabriela, disqualifying others because they have not finished college shows your absolute ignorance. You should be proud of your high school diploma and not take it on others who are more advanced and in college.
Is this Gabriela another hidden wannabe-lover in Tiger´s list? Why is she upset?
Gabriela needs to get the object that is lodged in her jhon brown hind quaters removed before she infects the rest of the internet. do us all a favor and lock it up Hiliary Clinton Jr. Thanks.
Let’s see…Republicans, led by Newt, were in charge of Congress from 1994-2006. Republicans were in charge of the White House from 1/2001-1/2009. How much of the debt can be attributed to the Republicans? Most of it. How much of the financial collapse and deregulation can be attributed to the Republican mantra of “deregulate, deregulate, deregulate?” Most of it.
How many solutions to our current crises have the Republicans put forward? Two: “Cut taxes and tort reform.” Cutting taxes on the rich didn’t work last time, and it won’t work this time. They cut taxes on the rich early in Bush’s first term. How much did that help you and me? It didn’t. You think they’re going to cut taxes on anyone but the rich and big corporations? Don’t make me laugh.
Bush increased spending by hundreds of billions. He and a Republican Congress passed Medicare Part D, but didn’t fund it. Saint Ronnie talked a good game, but spent, spent, spent. Look it up. He increased the federal deficit by billions.
Exactly why would you want to put the Republicans back in power?
What proposals have they put forth for solving any problems except cut taxes and tort reform? None. Not one.
This is an eye opening article. You are right. We must stand up and show some backbone in 2010. I am staying on the bridge and fighting for this country. Keep up the good work Stefanie.