When will the Congress and the Administration ever stop spending money we don't have?

A recent item found on Newsmax.com led with the statement that; "The Treasury Department says it expects to hit the government's debt ceiling by the end of February…

"Apparently; the Treasury has asked the Congress to increase the debt ceiling from its current $12.4 trillion mark to $14.3 trillion and they've agreed. Imagine that! Now I understand that I'm an old curmudgeon because I remember when Everett Dirksen, a former Congressional Representative and Senator from Illinois was widely believed to have said; "A billion here, a billion there, and pretty soon you're talking real money." While there is no historical evidence that he ever uttered this phrase, it is the phrase itself, rather than its attribution that is important.

Most of us can remember a time when we were shaking our heads and democrats were shaking their fingers at the Bush administration's $500 billion deficit. Democrats were in high dungeon in 2005 when Vice President Dick Cheney said; "Deficits don't matter." Democrats pointed to this as proof positive of the economic illiteracy of the Bush White House.  When George Bush took office the deficit was pegged at $5.73 trillion. By the time he left office it was $9.85 trillion, an increase of $4.12 trillion; a staggering 41%! That's a whopping $1.4 billion a day for each day in office; offering further evidence that maybe the dems knew of which they spoke.

Fast forward to today. A $9.85 trillion deficit has morphed into $12.4 trillion, and Barack Obama has only been in office about 390 days. That's a 20% increase over Bush; or $6.5 billion a day: A new record! All you naysayers out there who keep carping about our President not having accomplished anything should be ashamed of yourselves. Barack Obama has single-handedly driven the nation to the brink of insolvency. Talk about change. If he keeps this up; all we'll have left is change, pocket change.

 Think I'm exaggerating? Let's just take a quick look at our short term liquidity. We are currently on the hook for somewhere in the neighborhood of $1.5 trillion in short term debt. The US currently has gold reserves totaling $228.5 billion, foreign exchange reserves of $134 million, and approximately $69 billion in oil reserves for a total of almost $300 billion. Under usually accepted accounting practice debt divided by assets is your 'current ratio'. In a perfect world this should be significantly less than 1:1. Conventional wisdom is that the closer it is to 1:1 the more potential trouble you're in.

Dividing debt by assets in this case yields an answer of 5:1. That's right; we as a nation owe $5 in debt for each dollar we have in assets; and that's short term.  You never want to be in a position where your short term liabilities exceed on hand assets. The reason you don't want this number so out of balance is simple. If all the banks, credit card companies, and other companies you personally owed money to suddenly called their notes, what would happen to you financially? You guessed it; debtor's prison.

It's the same for the country. If all the foreign and domestic investors in the US were to collectively call their short term notes, we could pay maybe twenty cents on the dollar. Ladies and gentlemen; we are circling the bowl and the Chinese have their hand on the toggle.

You might now well say; "Bill, this is all patently ridiculous! We have untold millions of cubic feet of natural gas and uncounted millions of barrels of oil securely hidden away underneath tens of thousands of acres of federally owned land. What about all that, huh?"  I'd have to say; "Yes that's true:  But that's exactly why they're called unproven reserves."  First we have no method to assess the quantity of these reserves. It's a SWAG.  Second; if we were to unprotect all those acres tomorrow, and immediately start the construction, extraction, and refining process; we'd have product for market in about a decade.

We currently owe China $722 billion. Does anyone believe for a minute that China would be willing to wait that long to get their money?  Does anyone believe they'd be willing to accept 40 cents on the dollar immediately?  No wonder our President was bowing to Chinese Premier Wen Jiabao. He was probably checking the floor for quarters. This bodes ill on other fronts as well. Has anyone has been wondering why we seem to have so little leverage with the Chinese lately? Why would China be the least bit interested in allowing a country they literally own to take the lead in setting political policy in the UN, economic policy in the G-20, or climate change policy in the COP-15?  If you thought we were getting shoved around by the Chi-Comms, go to the head of the class! 

One could not find a better mechanism for transforming our nation's standing with the rest of the planet than piling up an unpayable debt. If this trend is not reversed, and quickly, America in this decade could very well emulate Argentina circa the1990's. The amount of evidence is overwhelming: Rather than the president not knowing what he's doing; I'm beginning to suspect that it's being done on purpose.