The growing mountain of US debt, graphically illustrated

On a visit to Romania two years ago a Christian dentist explained to me how the world economic system worked.

‘It’s like this,’ he said.

‘The average American earns $20 an hour and spends $25 an hour.'

'The average Chinese man earns $5 an hour and spends $4 an hour and lends the other dollar to the American.’

‘Because there are about five times as many Chinese men as Americans the sums work out pretty well.’

‘The only problem though is that both American and Chinese man are doing the same job and it is a global market.'

'So what will happen in time is that wages in America will come down and those in China will go up and when that happens there will be an awful lot of kicking and screaming in the US and possibly something even worse.’

I haven’t checked his sums but I thought his comments were rather insightful and the general gist is chillingly correct.

We all know that US debt is spiralling out of control, but all we get from the media is a moment by moment commentary but without the big picture.

So the Telegraph tells us today that Washington is due to hit its borrowing limit on 17 October, at which point the US government runs out of ‘extraordinary measures’ to raise new cash to pay its bills, risking an unprecedented default on US sovereign debt.

We are warned that markets are therefore braced for a choppy week because US politicians failed to strike an agreement on raising the debt ceiling over the weekend, leaving it just days away from hitting its $16.7 trillion (£10.3 trillion) borrowing limit.

Jim Yong Kim, President of the World Bank, on Saturday has warned that the US is just ‘five days away from a very dangerous moment’ unless politicians produce a plan to avoid default.

Christine Lagarde, President of the IMF, meanwhile repeated her warning that failure to raise the US borrowing limit would lead to ‘massive disruption the world over’. 

But let’s put the daily headlines aside and look at the big picture.

By raising the debt ceiling even further the US will be moving even more into unprecedented debt.

Since 2001 the debt limit has been raised 14 times for a total of $10.7 trillion to its present level of $16.7 trillion (see above).

It also stands at around 100% of GDP, the highest level since the Second World War (see right).

So who is this debt owed to? (see below)

Over half of the debt is publicly owned within the US or is tied up in Social Security Trust Funds.

Over 30% is owed abroad with China (8%) and Japan (6%) being the biggest creditors.

When I was a boy my father taught me to live simply, give generously, save for future necessities and never to go into debt. It has served me well.

St Paul told the church in Rome to ‘Let no debt remain outstanding, except the continuing debt to love one another.’ (Romans 13:8)

Jesus was even more radical, ‘Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.’ (Luke 6:38)

Why is it I wonder that the richest nation on earth is also the most indebted and lurching from one financial crisis to another?

I suspect the answer is found in another Bible book, ‘Human desires are like the world of the dead - there is always room for more.’ (Proverbs 27:20)

However high your income is, if your expenditure is greater you are heading eventually for a fiscal cliff without a happy landing. 

US House of Representatives vote for 20 week abortion limit raises the issue again for the UK

The Republican-controlled US House of Representatives has passed a bill that would reduce late abortions.

The plan to restrict terminations to the first 20 weeks after conception was approved by 228 votes to 196, largely along party lines.

The Pain-Capable Unborn Child Protection Act, which was based on research showing that the unborn child can experience pain by at least 20 weeks gestation, marks the first time that the United States’ Congress have voted to give affirmative protection to unborn children.

The debate followed polls showing that 64% of the American public would support legislation prohibiting abortion after 20 weeks (more detail is in Parliamentary Network for Critical Issues article).  

But the bill has no chance of becoming law as Democrats control the Senate and the White House has threatened a veto.

Most US states allow abortions to when a baby becomes viable outside the womb, considered to be some 24 weeks.

The Republican leadership pressed ahead with the abortion bill after the case of Kermit Gosnell, a Philadelphia abortion doctor who was recently sentenced to life in prison after being convicted of killing three babies delivered alive.

There has also been a lot of support for lowering the upper limit amongst UK politicians.

Health Secretary Jeremy Hunt came in for criticism last year  for saying that he believes the upper abortion limit should be lowered from 24 to 12 weeks. 

However he is not alone. Of the 16 Conservative MPs in Cabinet, 13 actually voted for a decrease in the abortion upper limit during the passage of the Human Fertilisation and Embryology Bill in 2008. 

Of these, three, including Mr Hunt, voted for 12 weeks, two voted for 16 weeks, seven voted for 20 weeks and one, the Prime Minister David Cameron, voted for 22 weeks. 

They are not alone in this conviction.

Nearly two thirds of the British public and more than three-quarters of women support a reduction in the 24-week upper age limit. 76% of the public think that aborting a baby at six months is cruel. Furthermore a 2007 poll by Marie Stopes International found that two thirds of GPs wanted a reduction from 24 weeks.

Why has public opinion changed on late abortion? There are five main reasons: 4D ultrasound, babies surviving below 24 weeks, stories of babies born alive after abortion, fetal sentience, and European precedent.

We have all seen Professor Stuart Campbell's high resolution 4D ultrasound images of babies 'walking’, swallowing, coughing, hiccupping from 12 weeks gestation and experienced how mothers bond emotionally to their babies as a result of these scans. We have also seen photographs of babies alive in the womb at 20 weeks (left).

The public also know about individual high profile cases like Manchester'sMillie McDonagh, born after a 22-week pregnancy and the world's most premature baby, Amillia Taylor, who was born a week younger in the US. Experts may argue about survival figures and about comparisons between population-based studies like EPICure and those from top neonatal units but the fact remains that some babies do actually survive below 24 weeks.

Stories of babies born alive after failed abortions are also not uncommon. In a 2007 West Midlands study of 3,189 cases of termination for fetal anomaly, 102 (3.2%) babies were born alive. This included 65.7% of those between 20 and 24 weeks. Accounts such as these understandably upset people.

And then there is the question of whether fetuses feel pain. The general public intuitively concludes that they do when they hear that from 16 weeks babies will recoil from a noxious stimulus in the womb and that premature babies born earlier than 24 weeks, if stabbed in the heel with a needle, will withdraw and cry. The RCOG wheels out its experts to tell us that babies below 24 weeks do not have the neurological apparatus to sense pain but fail to tell us that this is a controversial view not shared by other experts who regard it as being based on an outdated understanding of physiology.

Which of us, honestly, can imagine telling the mother who feels her baby kick at 20 weeks that it is not a sentient being?

Finally, Britain is out of touch with most of Europe in this matter. Most countries in the EU, 16 out of 27, have a gestational limit of 12 weeks or less. These include Germany, France, Spain, Portugal, Italy, Belgium and Austria plus most countries in Eastern and Central Europe who once had far more liberal laws. At 24 weeks Britain is up there with former Soviet States Lithuania and Latvia.

In 2010 there were 792 disabled babies and 1,936 able-bodied babies aborted in Britain between 20 and 24 weeks. Every single one of the latter group was aborted under ground C of the Abortion Act, which in 98% of cases means protecting the mental health of the mother.

Lowering the abortion limit to 20 weeks for able-bodied babies (as Miller and many other MPs would support) would give more legal protection to about 2,000 babies a year; just 1% of the total. It would put clear blue water between the upper abortion limit and the lower threshold of viability and it also would show that parliament is beginning to listen.

Of course it would also raise the question of whether we should be doing the same for disabled babies, who can currently be aborted up until the moment of birth, a question evaluated by a recent parliamentary inquiry which is due to report soon. 

Why the US 'fiscal cliff' bill fails to address the economy's real underlying problems

The US fell off the ‘Fiscal cliff’ at midnight on 31 December with tax rises of about $536bn and spending cuts of $109bn from domestic and military programmes coming into force.

But the Democrat-controlled Senate (upper house) then passed emergency legislation at 2.07am on New Year's day by 89-8 to cut taxes back for households making less than $450,000 (£277,000). This measure has now been passed, 21 hours later, by the Republican-controlled House of Representatives with a margin of 257-167. This move effectively increases taxation for the very rich whilst maintaining government spending and involves both sides giving considerable ground.

However, this frantically-drafted compromise only delays deep spending cuts by two months, meaning Republicans and Democrats are likely to face a new crisis at the end of February by which time the US is due to hit its 'debt ceiling' of $16 trillion (the debt ceiling is the amount of money the government can legally borrow to service its debt - see graph above).

The debt ceiling was most recently raised on January 30, 2012, to a new high of $16.394 trillion. At the end of 2012 it already stood at $16.351 trillion (see debt clock here).

The estimated population of the United States is 315 million so each citizen's share of this debt is about $52,000. The National Debt has continued to increase an average of $3.8 billion per day since September 28, 2007! (see chart right)

The United States public debt is the money borrowed by the federal government of the United States through the issue of securities by the Treasury and other federal government agencies. US public debt consists of two components:

1. Debt held by the public including treasury securities held by individuals, corporations, the Federal Reserve System and foreign, state and local governments (currently about $11 trillion)

2.Debt held by government accounts or intragovernmental debt includes non-marketable Treasury securities held in accounts administered by the federal government that are owed to program beneficiaries, such as the Social Security Trust Fund (currently about $5 trillion)

Public debt increases or decreases as a result of the annual unified budget deficit or surplus. The federal government budget deficit or surplus is the difference between government receipts and spending.

Historically, the US public debt as a percentage of GDP increased during wars and recessions, and subsequently declined. For example, debt held by the public as a share of GDP peaked just after World War II (113% of GDP in 1945), but then fell over the following 30 years (see graph below).

In recent decades, however, large budget deficits and the resulting increases in debt have led to concern about the long-term sustainability of the federal government's fiscal policies and neither Republicans nor Democrats have seemed able to control it. Now they are caught between the devil and the deep blue sea – do they increase taxes risking national unrest, stifling growth and pushing the country back into recession, or do they decrease welfare spending and risk pushing hundreds of thousands over the poverty line?

At the end of 2012, debt held by the public was approximately $11.579 trillion or about 73% of GDP. Intra-governmental holdings stood at $4.791 trillion, giving a combined total public debt of $16.370 trillion.

So who is this $16 trillion owed to? Just under $5 trillion of the national debt is owed to the Social Security Trust Fund and federal pension systems.

A little more than $11 trillion is owed to foreign and domestic investors and the Federal Reserve, which buys up treasuries in order to drag down interest rates through quantitative easing (ie. printing more money!).

China has actually decreased its holdings of US debt over the past year, dropping from $1.31 trillion in June 2011 to $1.16 trillion a year later, according to the Treasury Department. Japan holds nearly as much, at $1.12 trillion. Those countries are by far the biggest foreign holders, but dozens of other nations, including Brazil, Russia, Taiwan, Switzerland and the United Kingdom hold trillions more. In total $5.5 trillion of the $16.3 trillion, just over a third, is held by foreign investors (see full listing here).

Inside the US, private investors hold nearly $1 trillion in federal debt, while mutual funds, insurance companies and state and local governments hold nearly double that amount.

Despite the fact that America is currently fighting no major war and has lived through a time of great prosperity it is caught in an upward spiral of debt of which over a third is owed to foreign investors. Without a significant decrease in government spending or increase in taxation, this spiral will only increase.

God promised the ancient nation of Israel that if they rejected him they would fall into great calamity including financial calamity:

‘ The foreigners who reside among you will rise above you higher and higher, but you will sink lower and lower. They will lend to you, but you will not lend to them. They will be the head, but you will be the tail. All these curses will come on you. They will pursue you and overtake you until you are destroyed, because you did not obey the Lord your God and observe the commands and decrees he gave you… Because you did not serve the Lord your God joyfully and gladly in the time of prosperity, therefore in hunger and thirst, in nakedness and dire poverty, you will serve the enemies the Lord sends against you. He will put an iron yoke on your neck until he has destroyed you.’ (Deuteronomy 28)

Could it be that America is now facing a similar fate – falling not under the sword but under the financial might of creditors both inside and outside its walls? (see more on the biblical analysis of the debt crisis here).

The US had a glorious Christian past but it is now increasingly driven by a secular agenda.

God’s promise to Israel at a similar time was clear:

‘If my people, who are called by my name, will humble themselves and pray and seek my face and turn from their wicked ways, then I will hear from heaven, and I will forgive their sin and will heal their land… But if you turn away and forsake the decrees and commands I have given you and go off to serve other gods and worship them, then I will uproot (Israel) from my land, which I have given them, and… I will make it a byword and an object of ridicule among all peoples.’ (2 Chronicles 7:14)

Might America turn? It is not too late yet, but it seems it will not be too long before it is.