America's Debt Problem Reaching Disaster Level?

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WASHINGTON -- All eyes are on Europe's financial problems, but with America's federal debt growing so large, so fast -- the U.S. could soon be in its own disaster.

What the United States government now owes the world is about the same size as what the entire American economy manages to produce in a year.

"Our debt just recently passed $15 trillion," said Alison Fraser, director of the Roe Institute for Economic Policy Studies.

Fraser added that this is a monstrous dead weight on the economy.

"We know when debt gets to be at this level, 90 to 100 percent of GDP... that economies, nations grow dramatically slower," she explained.

The dire consequences can be seen with huge borrowers like Greece and Italy.

Their debt is so large they face default, unrest, severe cutbacks in social services, stalled economies, huge layoffs, and soaring interest rates.

"Greece's debt burdens have definitely had an impact on the prosperity of their own population," National Taxpayers Union Executive Vice President Pete Sepp said.

Investors are so worried about Italy's debt that interests rates have more than doubled because of the risk involved.

"Investors from the outside become less willing to put their money in an economy that is seen to be struggling with excessive borrowing," Sepp said.

Right now, Italy's debt is 121 percent of its annual GDP. In just five years, America's debt will be at 115 percent.

At this rate, by 2050, America's debt could be as much as 344 percent of the annual GDP.

Right now, the part of the national debt each citizen owes is around $32,000. By 2050, that will be about $280,000.

America right now pays almost $500 billion in interest every year on what it owes. And that interest could double as it did in Italy.

"Imagine, we'll be spending the equivalent of the current Medicare program or close to it on nothing," Sepp explained. "Simply servicing money that we've borrowed."

"(The interest paid) won't feed a child, it won't take care of an elderly person and it won't defend our country," he continued.

"And it doesn't go to things that are productive and that help to grow the economy," he said.

Fraser said fans of big government have to face the fact that if they want to save federal programs, the only way to do so is to slash spending and stop talking about raising taxes.

"We're not under-taxing Americans. And even the mere talk of hiking taxes chills investment, and that chills job creation," he said.

Sepp agreed that America has to cut spending, promote growth, and halt its debt addiction, or else.

"Over-borrowing has been the demise not only of governments, but entire economies and societies," he said. "People become tremendously impoverished."