Many conservative sources have been predicting problems for the United States Economy based on the record-setting national debt whose growth has been accelerated during the first year of the Obama Administration. Today in a front page, top of the fold story, the “Bible of Progressiveness,” the NY Times has joined the conservatives in predicting severe problems for the US economy based on the fiscal irresponsibility of our government.
In this first article of a series, the Times looks at the structure of the debt and how it looms as a danger on the country’s horizon. The United States Economy has become like those sub-prime mortgages that almost brought down the banking system last year. We have borrowed more than we can afford but as long as interest rates stay low, we will be able to make payments. Once rates go up, the federal government will have to “default on its homes.”
…Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.
With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.
In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.
The potential for rapidly escalating interest payouts is just one of the wrenching challenges facing the United States after decades of living beyond its means.
Interest rates are being kept artificially low, but that can’t last:
Even a small increase in interest rates has a big impact. An increase of one percentage point in the Treasury’s average cost of borrowing would cost American taxpayers an extra $80 billion this year — about equal to the combined budgets of the Department of Energy and the Department of Education.
But that could seem like a relatively modest pinch. Alan Levenson, chief economist at T. Rowe Price, estimated that the Treasury’s tab for debt service this year would have been $221 billion higher if it had faced the same interest rates as it did last year.
The White House estimates that the government will have to borrow about $3.5 trillion more over the next three years. On top of that, the Treasury has to refinance, or roll over, a huge amount of short-term debt that was issued during the financial crisis. Treasury officials estimate that about 36 percent of the government’s marketable debt — about $1.6 trillion — is coming due in the months ahead.
When the NY Times begins to worry about the national debt, it means we are really in trouble. And this is just the very tip of the iceberg. Remember, these debt figures do not include ObamaCare, a second stimulus, Cap and Trade and any of the other debt producing programs in the Democrat party agenda.
A link to the entire times story is below: