Staggering U.S. Debt Could Hit Us In The Long Run

The next U.S. president will inherit a record budget deficit of more than $490 billion, a Bush administration official said Monday, according to the Associated Press. That figure shouldn't surprise anyone, with our economy not in the best shape right now, the war in Iraq, and the stimulus payments made to 130 million households.

When Uncle Sam spends more than it has, it's not necessarily a cause for concern. Sometimes, governments need to borrow money to stimulate the economy and pay for services they are supposed to provide. But the size of our rising debt and who is paying for it should certainly raise our eyebrows.

Americans outraged by U.S. dependence on foreign oil and free trade agreements may not realize that we also depend on foreign money to pay our expenses, and our dependence on it has gone up significantly as our spending has increased.

At the end of 2007, foreigners - such as Japan, China and others - are believed to have held 44 percent of total U.S. Treasury debt held by the public, compared with 31 percent in 2000.

Sure, these countries are getting paid interest for bearing the debt, but it does not change the fact that when we depend on strangers for paying our bills, we are more vulnerable economically and politically. Right now, foreign investors consider United States debt safe and desirable, but any prolonged downturn in the U.S. economy may cause a run on U.S. bonds.

Whoever the next president is should make it a priority to slash our federal deficit. To make things worse, the rising deficits come as the United States faces the challenge of paying for Medicare and Social Security to retiring boomers.

First thing financial experts tell people is to live within their means and eschew credit. While we understand that it may be unrealistic to expect the federal government to have balanced budgets each year and never borrow, especially in tough economic times, the magnitude of its spending without accompanying revenues can bode badly for now and later.