We have borrowed ourselves to the brink of disaster. The only logical way to resolve this quandary is to reduce spending, pay down debt, and increase savings.
It took 28 years to get to this point, and it will take at least a decade to repair the damage. Some indisputable facts will put our current predicament in perspective:
- The US National Debt was $930 billion in 1980, or 33% of GDP. Today it is $10.7 trillion, or 76% of GDP. The national debt has grown by 1,150% in 28 years.
- GDP was $2.8 trillion in 1980. Today, it is $14 trillion - and declining. GDP has grown by 500% since 1980 - which means the national debt has grown more than twice as fast as GDP.
- Total US consumer debt in 1980 was $352 billion. Today, US consumer debt totals $2.6 trillion - 738% in 28 years. Revolving credit increased from $56 billion in 1980 to $982 billion today, a 1,750% increase in 28 years.
- The real median household income was $41,258 in 1980. The real median household income in 2007 was $50,233. Over the course of 28 years, households are bringing home 22% more. The trickledown theory turns out to be a drip.
- The personal savings rate was 12% in the early 1980s and reached negative 1% during the Bush administration. It has inched above 2% in the last few months.