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National debt a palpable worry as Obama speaks to nation

WASHINGTON — The number is so cosmic it's easy to dismiss: $12,000,000,000,000. (That's trillion, if you're still counting zeros.)

To put the national debt in more accessible, if more arresting, terms, it's equivalent to $40,000 for each man, woman and child in America. And consider that in the three minutes it will take to read this article, the burden will grow by $6 million.

As he delivers his first State of the Union speech tonight, President Barack Obama will talk about creating jobs, the middle class and health care reform. But he will also seek to tackle unsustainable government spending.

Obama will propose a three-year freeze on nondefense expenditures, which would save up to $15 billion in the budget he will release Monday, and $250 billion over a decade.

That's a blip given the debt is projected to increase by $9 trillion over the same period. The 2010 budget deficit — the amount by which government spending exceeds revenues in a given year — is $1.35 trillion, the second-biggest since World War II.

Still, the president's modest action confirms the issue has moved beyond a debate among economists to a palpable public worry — one that helped drive the stunning Massachusetts U.S. Senate election last week.

"I think most of us think, 'Well nobody really cares.' They do care. They didn't like the stimulus, they didn't like the (bank bailout), they didn't like the automobile bailout," said Sen. Dianne Feinstein, D-Calif.

"Americans get that we can't continue to borrow and print our way out of economic difficulty," said U.S. Rep. Adam Putnam, R-Bartow.

• • •

The tough talk has yet to meet action. On Tuesday the Senate rejected a plan to create a bipartisan commission that would recommend ways to cut the debt. The narrow defeat showed that, in general, Republicans remain allergic to tax increases while Democrats are squeamish about cutting social programs.

Both Florida senators, Democrat Bill Nelson and Republican George LeMieux, voted for the panel, which would have submitted its findings for Congress to vote on after the November elections.

"It was not perfect but we need to do something," LeMieux said. "The spending problem we have is like a cancer, and this chamber refuses to seek any treatment."

To compensate, Obama could announce tonight that he will form his own committee. But it would lack the muscle that the congressional panel would have.

Not acting could have serious consequences. Lenders — increasingly, the Chinese and other foreigners — could see U.S. debt instruments as increasingly risky and demand higher interest rates. This would trickle through the economy, translating into costlier business loans and mortgages. Or lenders could stop buying Treasury notes altogether.

"It could create a situation as bad or worse as the one we're in and with government not having the capacity to bail us out," said Marc Goldwein, policy director of the Committee for a Responsible Federal Budget, a bipartisan group in Washington.

Future tax cuts would be off the table. Same for new spending. And future generations would be stuck with the damage.

• • •

So how did we get here?

Ask Republicans and they'll blast "out of control" spending by Democrats. They had fresh ammo Tuesday with a scheduled vote to increase the federal debt limit by another $1.9 trillion.

"We have to pay the bills for what we've already spent," White House spokesman Robert Gibbs said in seeking to explain how the president could be for both reducing the deficit and increasing the debt limit.

Ask Democrats and they'll blame the previous White House occupant. The massive tax cuts pushed by President George W. Bush and the two wars started under his command.

But the severe economic downturn is also a contributing factor, along with Obama's $787 billion stimulus package and other initiatives enacted to turn the tide.

"Whoever won the presidency in 2008 faced a grim fiscal legacy, a fact already well known as the presidential campaign got under way," reads a recent report by the Center on Budget and Policy Priorities.

One of biggest driving factors in the bleak forecast has nothing to do with partisan politics. It's the baby boomers, stupid.

Herds of retirees will no longer be paying income tax or producing for the economy while putting enormous strain on Medicare.

By 2017, the hospital trust fund is expected to be exhausted. Social Security will be paying out more than it collects beginning in 2016.

At the same time, medical costs (Medicaid included) are expected to keep increasing. The health care reform bill grinding through Congress is expected to control some of those costs even though critics have criticized it as too costly.

"This is a frightening situation," said Joseph J. Minarik, a top researcher with the Committee for Economic Development, a nonpartisan policy group in Washington.

"Turn back the clock 10 years," he added, "and we were talking about how over a period of time, we would pay the debt down to where it was at the end of World War I. It would be trivial. Instead people said, 'I want my tax cut and I want it now.' And then other things went wrong."

Obama may have inherited those problems as much as he has contributed. But as he begins his second year, they are firmly attached to him and his legacy.

Tonight the president will have to balance that with a sense that more attention — and more spending — is required to bring the nation out of the more immediate crisis.

Times researcher Will Short Gorham contributed to this report, which also used information from the Associated Press.

Tonight's State of the Union address

Time: 9

TV: All major networks

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Fast Facts

What's a trillion?

• Thinking of counting to a trillion one second per number? It will take 31,688 years.

• And tack on a few more years if you want to go for 1.35 trillion, the dollar estimate for the federal deficit in the current budget year.

• The $1.35 trillion debt for 2010 could be taken care of if every American, all 300 million of them, forked over $4,500.

• In 1981, President Ronald Reagan, characterizing the national debt as it approached $1 trillion, commented that "a trillion dollars would be a stack of $1,000 bills 67 miles high." The debt, the accumulation of annual deficits, now stands at more than $12 trillion.

• Put another way, the $1.35 trillion could pay for 40,000 players like Alex Rodriguez, whose $33 million salary in 2009 made him baseball's richest man.

• A trillion is one followed by 12 zeros.

Associated Press

National debt a palpable worry as Obama speaks to nation 01/26/10 [Last modified: Tuesday, January 26, 2010 11:22pm]
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