A preparatory analysis by the Congressional Budget Office reveals that President Obama’s proposed 2011 budget, if adopted in situ, would add about $9.8 trillion to America’s already built up, massive debt portfolio. 

According to the CBO, this estimated rise in America’s debt portfolio is as a result of two factors, which according to CBO would cost America about $3 trillion.

The first being President Obama’s plan to exempt the middle and the upper-middle income families from the AMT (the Alternative Minimum Tax) while the second is the plan to stretch the 2001 and 2003 tax cuts for the many U.S. citizens.

The CBO estimated that by the year 2020, public debt would have risen to over $20 trillion – that is 90% of GDP, which is a further rise from the 2009 53% of GDP, and out of the $9.8 trillion mentioned above, $5.6 trillion is estimated to come from accrued interest.

This titanic growth of public debt is not just a theoretical alarm of economists; it is likely to hurt the practical situation of most American families and firms.

In fact, experts have continued to condemn this anticipated debt increase because of some of it fundamental effects on the economy.

Although, in a sophisticated industrial society like the US, the public debt (gross public debt – Treasury bonds held by public investors and internal obligations like those to the Social Security trust fund) can rise from 30% to 90% of its GDP without having much negative impact on the macroeconomic indices – inflation or economic growth. 

On the other hand, Harvard Professor Kenneth Rogoff’s recent research reveals that, once gross public debt exceeds 90 percent of GDP, it could ‘dump’ some serious negative effects on the economy earlier than expected. 

This means that, if this trend continues, all efforts to recover America’s economy may be frustrated completely.