Here's a timeline that help put the US probelms in perspective;
History of US Debt
The present day debt of the United States of America exceeds the sum of all budget deficits & surpluses going back to 1776. To say that China has concerns over its position regarding this level of debt is an understatement.
1789 US Federal debt stood at $79 million (40% GDP) 1835 US Federal debt was zero, the only time in history 1812 During the War of 1812 US Federal debt stood at 14% of GDP 1860s During the American Civil War US Federal debt exceeded $1 billion for the first time (30% GDP) 1913 US Federal debt was down to 7% GDP. 1913 also marked the year that the US Federal Reserve System was created in order to manage the nations money supply & oversee national banks. It also marked the birth of Income Tax which at this time was signed into law 1917-1919 During World War 1 US Federal debt reached 35% of GDP 1929-1939 During the Great Depression US Federal debt reached 44% of GDP 1939-1945 During World War 2 US Federal debt reached a staggering 122% of GDP & for the first time exceeded $2 billion 1965 During the Vietnam War Federal debt was 47% of GDP. Medicare & Medicaid were both enacted at this time 1970s The US battled severe inflation during this period with Federal debt reaching 35% of GDP 1980 US Federal debt had reached $909 billion 1988 In eight years US Federal debt had ballooned to $2.6 trillion 1990 US Federal debt was 64% of GDP 1992 US Federal debt had exploded to a staggering $4 trillion & this also marked the end of the Reagan era. The US had become addicted to debt with people right across the political spectrum very alarmed by this. It was after all during a period of relative world stability with the Cold War ending 1992 The US was in recession, President Clinton was elected & tax cuts were considered too expensive to the economy. The administration turned to balancing the budget 1996-1997 The first US balanced budget occurred in a generation 1993-2000 The Clinton era & Federal debt was 57% of GDP 2000 US Federal debt stood at $5.6 trillion. George W Bush was elected President 2001 September 11 terrorist attacks occurred in the US 2003 By now the wars in Iraq & Afghanistan had cost billions of dollars & 3 major tax cuts had been passed in law 2003 US federal debt had reached $6.5 trillion. During Bushs first term as president interest rates had been cut 12 times & the US$ began a long steep decline against other currencies. Cheap credit flooded the housing market with many home buyers entering risky, non-fixed mortgages. Bush signed into law an expensive Federal drug benefit program called Medicare D 2004 Bush won re-election & US Federal debt reaches $7.4 trillion 2005 US Federal debt was $8.2 trillion 2007 US Federal debt was $8.7 trillion (66% GDP) 2008 Federal spending was $2.9 trillion with Federal revenue $2.5 trillion meaning that a $410 billion budget deficit existed. In the last 40 years the US has had 35 budget deficits & only 5 budget surpluses four of which occurred from 1998-2001 As the baby boomer generation retire social services will be paying out more than it takes in 2008 US Federal spending was divided into; Social Security - $610 billion Medicare - $330 billion Medicaid - $204 billion Military - $607 billion Everything else - $936 billion Interest on the debt - $244 billion
US citizens spent more money than they made for the past two years in a row, the last time this occurred was in 1933-1934 The US is a consumption society meaning that they consume more than they produce. This is unsustainable in the long term The US personal savings rates as a % disposable income; 1966: 12.4% 1982: 13.6% 1998: 6.7% 2005: 3.6% 2008: -2.9%
In 2007 China was positioned at number 1 with the largest trade surplus in the world while the US was in last place at number 224 with a massive trade deficit. At this time the US had 44.5% foreign owned debt (largely China)
It is estimated that by 2040 the US Federal debt will reach 240% of GDP
