Question: Could it be true that U.S. debt is rising so fast that the federal government is careening toward a “payment shock” in the not-too-distant future?
This article/blog post reveals that the U.S. debt is rising so fast that the federal government is careening toward a “payment shock” in the not-too-distant future-You Decide:
New York Times: U.S. Racing Toward Debt ‘Shock’!
These are the pertinent excerpts from this article/blog post:
“A page one, top-of-the-fold New York Times report Monday warns that U.S. debt is rising so fast that the federal government is careening toward a “payment shock” in the not-too-distant future.
The Times lead headline read: “Federal Government Faces Balloon in Debt Payments: At $700 Billion a Year, Cost Will Top Budgets for 2 Wars, Education, Energy.”
The Times headline appears eerie just as the Senate moves to push forward on a radical healthcare reform — with CBO estimates for a final bill costing nearly $1 trillion dollars over the next year.
The national debt now stands at over $12 trillion and the White House estimates that the cost of servicing the debt will rise to more than $700 billion a year in 2019, up from $202 billion this year. The Times suggests that $700 billion annual payment cost may be conservative.
The additional $500 billion a year in interest payments would surpass the combined budgets this year for education, energy, homeland security, plus the wars in Iraq and Afghanistan, the Times observes.
Treasury officials face not only huge new debts incurred in response to the economic meltdown but a balloon of short-term borrowings coming due in the months ahead, and interest rates that are certain to return to normal levels when the Federal Reserve concludes that the fiscal emergency has passed.
“Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages,” The Times reported on Monday.
Interestingly, the alarming Times analysis comes as the nation is in the midst of a debate over healthcare reform proposals that could add many billions of dollars to the overall debt.
Record deficits have arrived just as payments for Medicare and Social Security benefits are set to explode, with the oldest Baby Boomers approaching age 65. This will result in what experts have long warned will be a “fiscal nightmare” for the government, the Times article notes.
“What a good country or a good squirrel should be doing is stashing away nuts for the winter,” William H. Gross, managing director of the Pimco, a bond management firm, told The Times.
“The United States is not only not saving nuts, it’s eating the ones left over from the last winter.”
As for the balloon of short-term borrowings coming due, that debt now accounts for 36 percent of overall debt, compared to the historic average of less than 25 percent, and more than $1.6 trillion is due by March 31.
Another problem: The Federal Reserve’s purchases of Treasury bonds and mortgage-backed securities to prop up the economy pushed down long-term interest rates by about half of a percentage point, but the Fed is set to reverse those policies — that alone could add $40 billion to the government’s annual debt service expense.
The Treasury Borrowing Advisory Committee, a group of market experts that advises the Treasury on debt management, declared this month: “Inflation, higher interest rate and rollover risk should be the primary concerns. Clever debt management strategy can’t completely substitute for prudent fiscal policy.”
And The Times warns: “There is little doubt that the United States’ long-term budget crisis is becoming too big to postpone.”
Note: The above article and/or blog post relates to and/or supports my following blog posts-You Decide:
U.S. Debt to Hit $20 Trillion in 10 Years!
Is the Fed’s concept of buying $600 billion of Treasuries just a smokescreen?
Who or What Was Behind the Financial Crisis?
Who or what caused the economic crisis that propelled President Obama into office?
ACORN-The Community Reinvestment Act (CRA)-Automaker Labor Unions!
Can America Survive Obamanomics and Remain a Capitalist Society?
Obama Bank Crackdown Hits Risk Appetite!
Manipulation Behind Market Plunge!
The Audacity of Socialism!
The Wall Street Bailout Bill Threatens Our Bottom Line!
Tyrannical Takeover of Our Financial Services Sector By the Federal Government!
Supreme Court to Strike Down Obamacare!
Is Obama Employing the Cloward-Piven Strategy?
Is it important to understand the Marxist assault on the foundations of our system?
Nearly 80 percent don’t trust the government!
What Is The Mount Vernon Statement?
How ABC, CBS and NBC Have Dismissed and Disparaged the Tea Party Movement!
Obamanites Get Violent in Support of the Agenda!
Were We Forewarned About What to Expect If President Obama Got Elected?
The Russian View of What Has Been Happening In America!
Where Is America Today?
Washington Times Calls for Obama’s Impeachment!
A Nation Adrift Theme and Disclaimer:
“Food For Thought”
“God Bless & Keep Our USA Safe”