While everyone in Washington right now is patting themselves on the back in the wake of Wednesday's debt ceiling deal, the reality is that it does little to address the nation's deepest budget issues.
True, the Band-Aid agreement will fund the U.S. government through Jan. 15 and lift the debt limit through Feb. 7.
But all it means is that Congress has just 90 days to take meaningful action on the problems that led to the government shutdown and debt ceiling fight in the first place.
If it doesn't, 2014 could be a very troubling year for both Washington and the U.S. economy.
Just look at these four disastrous problems the debt ceiling deal fails to fix...
What the Debt Ceiling Deal Failed to Fix
Some commentators argued during the shutdown that having a debt ceiling makes no sense. Some even argued that a U.S. president should have unilateral power to raise the debt ceiling as needed.
But they seem to miss the point that the debt ceiling isn't the problem - it's the rising levels of debt that Congress continues to rack up at a record pace. Yes, we have to pay our bills, but every now and then we have to be reminded of just how out of control those bills have become. The limit on the borrowing authority acts as a reminder and should have spurred some conversation about how the United States will bring its long-term liabilities under control.
That didn't happen this week.
The U.S. national debt is on pace to reach $20 trillion by the end of the decade, which means that if interest rates rise to 5%, the nation will need to pay $1 trillion a year just to service the debt.
The national debt has increased by 55% since President Obama took office. This translates into an unbelievable $123,000 per American worker, according to a recent Harvard University Institute of Politics study. This also translates into $53,000 in debt for every man, woman, and child in the country.
However, any time Congress attempts to take a bite out of the bloated budget, an interest group pops up and cries foul. Cutting budgets derived from other people's money is much harder for career politicians than finding new ways to spend that money.
At the moment, there is no plan to curb spending, despite all of the claims about reduced deficits and budgets. The national debt will continue to climb, which means we'll slam into the debt ceiling again in just three months.
But instead of directing his attention to the debt problems, President Obama has already said he wants to focus on immigration reform.
No wonder the Chinese ratings agency downgraded the United States this week.
But that's just the start of the fiscal problems facing this country...
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.
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