Nightly News   |  February 08, 2010

National debt a set-up for future shock

While some economists argue that running big deficits now will help the economy recover and create jobs, most agree that the U.S. national debt presents a huge problem that even robust economic growth won’t fix. NBC's Lisa Myers reports.

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>>> early november . one of the issues that's been weighing down the financial markets is dealt, fears about high levels of debt at home and europe. eye-popping deficit numbers that have put the u.s. in some unchartered waters when it comes to borrowing and paying it back. lisa myers has the first of two reports tonight on what could be a nasty future shock for what we've always come to know as the american way of life .

>> reporter: for decades, politicians have sounded the alarm about red ink .

>> our national debt is approaching $1 trillion.

>> permanent deficit spending must come to an end.

>> reporter: today the situation is much worse. this year's deficit alone is projected at a staggering $1.6 trillion. the national debt has soared to $12 trillion about 30,000 for every american. and look at this chart, debt is a percentage of our total economic output. it's now 40% of our economy, and driven by skyrocketing spending, more than doubled in just eight years.

>> there's such a thing as going on a binge and we've been on a binge in our personal lives and the way we've borrowed, overborrowed, our government's been on a binge.

>> reporter: running big deficits now is good some economists argue. they help the economy recover and create jobs.

>> the deficit is the only thing supporting the economy right now. if we were to get rid of the deficit tomorrow, we would probably see the unemployment rate climb to 14% or 15%.

>> reporter: over the longer term, most agree we have a huge problem. beyond mortgaging our children's future, there are are national security implications. most of the money we're borrowing comes from the chinese, which gives them leverage.

>> they're making very clear that they're not taking orders from uncle sam any more.

>> we're on a course right now, that i think everybody in washington believes we cannot stay on. that doesn't mean anybody in washington is willing to compromise.

>> when the president suggest that we scrap manned space flights to save money many disagrees. neither side is willing to touch the third rail of politics entitlement spending, such as social security and medicare. the result total gridlock.

>> you have to tell people that benefits are going to have to be reduced, we're going to have to raise revenues and those are just not politically popular things.

>> here's another troubling fact.

>> right now americans on average pay 31% of their income in federal, state and local taxes. in 20 years if nothing is done, taxes would need to consume at least 45% of your income just to pay for existing promises. lisa myers , nbc news, washington .

>> tomorrow night here, a look