Monday, September 3, 2012

$16 trillion

The problem with socialism is that eventually you run out of other peoples' money.
There is considerable dispute (see here and here) as to whether former British Prime Minister, the Iron Lady, Margaret Thatcher ever uttered this wise and memorable line. But wherever it derived, it is certainly insightful and applicable to our mess today.

Yet the fiscal problem with our modern socialist nation is not that we might eventually run out of other peoples' money, but that we already have and, indeed, we did long ago.

This week, whilst democrats celebrate the re-nomination of their Messiah of the unrestrained growth of government spending, the national debt will surpass $16 trillion.  Interest on that debt last year, when the debt was lower, was $230 billion, or 6% of our national budget.  It has grown $5.4 trillion just since President Obama took office.

First, what that means today.  The interest on the debt represents our penance for over-spending in the past.  All the Great Society programs and our endless foreign intervention have yielded the interest payments that we will have forever. Assuming the cost of upgrading the Brent Spence Bridge is $3 billion, the interest payments alone would finance 77 such projects annually. Conversely, if we had not engaged in our orgy of post WWII over-spending, we could afford 77 more such projects year after year after year.  This is the impact right now.

And although it's more dire than "bad enough" today, it's getting worse by the hour, as we all see with the national debt clock ticking away.  By the hour, while we are already sunk knee-deep in debt, we are spending more than we are taking in, to the tune of $1.33 trillion this year alone.

But here's the really frightening thing: We are actually yielding a tremendous dividend from the recession: low interest rates.  Presently hovering under 3%, they are just half what they were a decade ago.  Thus, when the economy gets revved up again (if it gets revved up again) or when lenders tire of the risk associated with irresponsible spending policies, rates may rise to the rate they were in just 2000: 6.6% -- or heaven forbid, much higher.
The Congressional Budget Office projects interest on the debt will rise to $778 billion by 2020.  A spike in interest rates, which many predict, would exacerbate that number to more than $1 trillion per year.

And, of course, because we refuse to pay our way out of this mess, that $1 trillion of interest is, guess what, just more debt!

So, more than just a political line, that debt and the interest payments it yields annually, is passed on to our children as the legacy of excess we have "enjoyed."

So, party on Democrats, and many over-spending Republicans.  The bill has already come due. 

No comments:

Post a Comment

We follow the "living room" rule. Exhibit the same courtesy you would show guests in your home.