Debt clock is ticking

On the day President Bush took office the national debt stood at $5.7 trillion. By the end of his two terms in office (yeah!) it had reached more than $9.8 trillion, a 70 percent increase. But this isn't about Bush-bashing - it's about The Clock.

As the National Debt Clock keeps ticking at a frantic rate of $12,000 per second, thus adding to the United States' $12.3-trillion deficit, you can bet your bottom dollar that, at no fault of your own, what you currently have in your pocket will be less in the years ahead.

Overall debt per taxpayer is more than $113,000 including short term (credit card) and long term (mortgage) payments, but the single largest contributor is the $40,000 due to the federal deficit. In a 24-hour period I witnessed a fifteen dollar increase.

Jerome Corsi of WorldNet Daily, "If the Obama administration increases the national debt by 65 percent every two years, the debt will be $16.5 trillion in 2010 and $27.225 trillion by 2012, the year of the next presidential election." If correct, the recent $1.9 trillion increase to the national debt ceiling will be revisited multiple times over during the next two years.

As expressed by John Silva, Managing Director of Wachovia, and other economists, "the housing market in the U.S. is essentially a government-sponsored entity."

That said, on Christmas Eve the Treasury Department removed the $400 billion cap on potential mortgage losses of Fannie Mae and Freddie Mac. After Dec. 31, Congressional approval would have been required. The temporary policy change for the next three years may have been strategically positioned to coincide with the 2010 Mid-term and 2012 General Elections.

Fannie Mae, Freddie Mac, the FHA and other government agencies now insure more than 90 percent of all mortgages against default, putting every American household on the hook in excess of $3,800 in assumed liabilities.

A report issued by Neil Barofsky, Special Inspector for TARP, cautions, "Even if TARP saved our financial system from diving off a cliff in 2008, absent meaningful reform, we are still driving on the same winding road, but this time in a faster car."

The report also states that any positive outcome of the program "will have been for naught if we do nothing to correct the fundamental problems in our financial system and end up in a similar or even greater crisis in two, or five, or 10 years." And, "To the extent that the crisis was fueled by a "bubble" in the housing market, the federal government's concerted efforts to support home prices... risk re-inflating that bubble in light of the government's effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market."

As it stands, Florida ranked second only to California in 2009 foreclosures (473,438 vs. 434,104) and well above runner-up states - Arizona (212,227), Illinois (105,472), and Texas (101,740).

The bad news is that 1.5 million homes have been lost due to foreclosure out of 2.4 million that began the process. According to the Mortgage Bankers Association, the delinquency rate for all FHA loans is 14 percent and the American Banking Institute claims over 58,000 business foreclosures during the twelve month period ending September 2009, up 58 percent from the previous twelve months.

The badder (sic) news is that projected foreclosures on all types of loans is expected to reach 13 million over the next three years, four years tops, the result of which will deflate the property values of 92 million homes by $2-trillion in high foreclosure neighborhoods.

Foreclosures lead to bank failures and of the 140 failed banks in 2009, more than half occurred in just four states - Georgia (25), Illinois (20), California (15) and Florida (14). Compare that to 2008 (25), 2007 (3) and zero the previous two years when the building boom was at its peak.

Speculation is that more than 200 banks will fail this year, a claim supported by the FDIC list of 15 bank failures through the end of January of which Florida, Georgia and Minnesota had two each.

Be leery when you hear reports that new home starts are on the rebound; that home values have stabilized; that investment markets are on a rally; that productivity is on the rise; that unemployment figures have leveled off - none of it is good enough to offset the up and coming and continuing onslaught of national debt. Remember, it's us taxpayers who must pay down the balance due.

Think of it this way: How long would it take you to pay off $40,015 in debt? Remember, mortgage payments, property taxes, various forms insurance (life, health, auto, home), utility bills, education expenses, just to name a few, would still be due. Better put, how many generations will it take to get the country out of debt?

Tick-Tock goes The Clock.