Speaking at Georgetown University on April 14th, President Barack Obama promised: “We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock. We must lay a new foundation for growth and prosperity — a foundation that will move us from an era of borrow and spend to one where we save and invest.” Nice words. But the Obama administration actions have produced all sand and no rock. From the Wall Street Bailout, to Cash for Clunkers, to Obama’s failed stimulus, this administration has been all about borrowing and spending. And as the New York Times reports today, it will not be long before we begin paying a real price for these policies:
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.
$700 billion a year in interest payments alone. That is more money than our entire defense budget for next year including the wars in both Iraq and Afghanistan. And that is a low end estimate. As Heritage fellow J.D. Foster has previously noted, governments around the world are also furiously borrowing, feeding a global debt bubble that will eventually force the U.S. Treasury to pay much higher interest rates. And much of the debt we took on this past year is coming due soon. The NYT reports that to take advantage of low rates today, the Treasury issued a huge amount of short-term debt. Treasury officials estimate that about 36 percent of the government’s marketable debt — about $1.6 trillion — is coming due in the months ahead. The Concord Coalition’s Robert Bixby comments: “The government is on teaser rates. We’re taking out a huge mortgage right now, but we won’t feel the pain until later.”
The American people are rightly concerned about this impending disaster.
Whatever eventually happens, I think everyone is just guessing as to the effects. I recall hearing a local economist on the radio once say that the entire economics industry was created to make meteorologists look good, so take their predictions for what they're worth. Still, based on history, we can at least make some educated guesses about the results of massive spending, and most of them are really ugly (unless you're a liberal, in which case facts and history are irrelevant, so everything looks GREAT…!), but no one has spent anywhere near these levels before, so it's uncharted territory.
Regardless of the details, I think it's safe to say this is not going to go well. Let's just remember who did it to us:
Notice the spike in 2009, when George W. Bush leaves office and is replaced by The One. It should also be noted that the Dems took over Congress in 2006, right about the same time that the deficit reversed its decline.
There's my two cents.