56% of GDP

From Bloomberg:

Buffett Says Federal Debt Poses Risks to Economy (Update1)

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By Shamim Adam

Aug. 19 (Bloomberg) -- The U.S. must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the world’s largest economy and its currency, billionaireWarren Buffett said.

The “gusher of federal money” has rescued the financial system and the U.S. economy is now on a slow path to recovery, Buffett wrote in a New York Times commentary yesterday. While he applauds measures adopted by the Federal Reserve and officials from the Bush and Obama administrations, Buffett says the U.S. is fiscally in “uncharted territory.”

“Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects,” Buffett, 78, said. “For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

The “greenback emissions” will swell the deficit to 13 percent of gross domestic product this fiscal year, while net debt will increase to 56 percent of GDP, Buffett said."

If you had $100,000 on hand, and owed $56,000, would you feel wealthy? Oddly enough, that 56% number is amazingly close to what the average American pays each year in all taxes; sales, property, income, etc. So if Americans are hooked on debt, isn't our government also hooked on debt?

Buffett goes on to say in the article that current government expenditures are exceeding receipts by 185 percent. How long could you, as an individual, sustain that sort of spending? We do it all the time when we use credit cards, car loans and mortgages. Borrow too much, and eventually it catches up with you.

The current levels of borrowing and spending are unsustainable and Obama, Bernanke and Geithner know it. It can't all be laid at their feet, but their current management of it can be. The underlying problem in our economy right now is that real estate prices have collapsed, putting so many people underwater in their mortgages. People are behind in the payment of all debt right now, impairing liquidity throughout the system, yet the stimulus was supposed to provide liquidity. Somehow, Mr. President, injecting billions of dollars into the big banks didn't free up the average consumer to spend money and create velocity in the economy. Go figure.

Mr. President, take the remaining unallocated funds, enact a tax cut, put money right into people's pockets and let us decide how best to spend it. When politicians begin to hand out the cash to favored parties, nobody wins.