Uh, Obama? We Have a Problem: Interest Expense to Hit $1 Trillion in 4 Years
I hate to interrupt Obama’s “We Don’t
Have a Spending Problem” World Tour. But reality intervened on Tuesday
as the Congressional Budget Office released a report that says that the
budget deficit will grow through 2023 and “will eventually require the
government to raise taxes, reduce benefits and services, or undertake
some combination of those two actions,” reports CBSNews- and all of that just to cover interest payments.
“In its annual Budget and Economic
Outlook,” writes CBSNews, “the CBO said debt held by the public will be
bigger by 2023 than in any year since 1951 and will be at 77 percent of
gross domestic product (GDP) by 2023, far above the 40-year average of
39 percent of GDP. As a result, the CBO report said, the federal
government’s interest costs ‘will be very high’ and will be rising.
Interest costs will more than double by the end of the ten-year
forecasting period.”
The CBO projects that interest rates on the Ten-Year Treasury Note will rise from 2.1 percent currently, to 5.2 percent in 2017.
In December, the Treasury Department
reported that total interest bearing debt owed by the government
carried an interest rate of 2.523 percent. Last year’s interest payments
on that debt totaled $360 billion.
If interest rates overall reflect
the CBO’s forecast for the benchmark, interest rates payments alone will
reach one trillion dollars by 2017.
Just current debt would require interest
payments of 2.5 times 2012 levels or $890 billion. You can add another
$100 billion in interest costs for deficits accumulated between 2013 and
2017.
If interest rates cooperate, interest on
the national debt will be the third largest line item in the budget by
2017, after pensions and healthcare, topping defense spending,
education, welfare and likely even Obama’s vacation budget.
If interest rates don’t cooperate and
they become infected by inflation, or silly things like…I don’t
know…RISK anyone?... then look for interest payments to be the top and
biggest line item in any budget.
So technically Obama doesn’t have a spending problem.
Obama will be out of office by 2017, so
yeah, HE doesn’t have a problem spending all that borrowed money. It’s
all of us suckers who have to live in the country after he’s done with
it who will have to make the choice between cat food and really large
interest payments on the national debt.
The other thorny problem with the CBO
forecast is that after this year the report is contingent upon the
economy growing “at its maximum sustainable level.”
The CBO pegs GDP growth as modest this
year-again- but bets the farm that GDP growth will hit “3.4 percent in
2014 and an average of 3.6 percent a year from 2015 through 2018.”
No offense to the folks at the CBO, but
really they should let politico-comedian David Letterman report
economics and go to writing jokes full-time. Since 2000, the US economy
has grown above 3 percent only twice, 2004 and 2010. With 2 years of
getting hits and the other years striking out, that’s not even a batting
average.
That’s a disaster.
No doubt higher government spending could
give the economy a temporary boost, as it did in the third quarter of
2012, just in time to save Obama’s re-election campaign. But we’ve
plunged from an annual rate of 3.1 percent growth in the third quarter
to recessionary activity in the 4th quarter.
If government spending was all that it was cracked up to be, wouldn’t the third quarter have kick-started the economy, rather than killing it?
While idiots like Ezra Klein of the
Washington Post argue that government spending needs to be much, much
higher and payrolls for the federal government need to be expanded
rather than contracted, the result would be catastrophic.
As it is, if we do nothing and let
current federal tax rates and spending drift, we’ll spend more on
interest than we do on education.
And Democrats, you have a problem: Tell them in 2017 how much you care about kids.
No comments:
Post a Comment