The startlingly honest and straightforward admission by President Obama came under questioning by Steve Scully during the C-SPAN interview. President Obama cites the failure to fix the US health care system as the long term reason for this fiscal crisis, and in the short term the extreme demand for money to rescue the financial sector, the auto industry and address the “huge recession.”

The current US national debt of $11 trillion comes out to$36,000 pear each living US citizen, and has continued to increase on an average at the rate of $3.8 billion per day since 2007. Of course US is not alone in this situation as IMF has calculated that average government debt for the richest G20 countries will exceed 100% of their GDP in 2014, compared to 40% in 1980 and 70% in 2000.

The growing debt burden has been mainly financed by printing money (technical term – quantitative easing) as we have reported in our previous posts here and here. However, the concern for rising debt has now pushed UK and US creditworthiness to the brink and put their AAA national debt credit rating very much at risk. However, tough budget cuts must still wait a while, as current stimulus spending is necessary to bring life back to the US economy. This creates for a very tough challenge for any world leader.

Full transcript of President Obama’s interview is available from C-Span here, but the relevant portion of the interview went as follows:

SCULLY: You know the numbers, $1.7 trillion debt, a nationaldeficit of $11 trillion. At what point do we run out of money?
OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we’ve made on health care so far. This is a consequence of the crisis that we’ve seen and in fact our failure to make some good decisions on health care over the last several decades.
So we’ve got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it’s putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.
So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don’t reduce long-term health care inflation substantially, we can’t get control of the deficit.