Category: Government

This is crazy, but it is liberals in action….

Via the Washington Post Business Section:

Interest payments on the national debt will quadruple in the next decade and every man, woman and child in the United States will be paying more than $2,500 a year to cover for the nation’s past profligacy, according to figures in President Obama’s new budget plan.

Starting in 2014, net interest payments will surpass the amount spent on education, transportation, energy and all other discretionary programs outside defense. In 2018, they will outstrip Medicare spending. Only the amounts spent on defense and Social Security would remain bigger under the president’s plan.

The soaring bill for interest payments is one of the biggest obstacles to balancing the federal budget, pushing the White House and Congress to come up with cuts deeper than previously imagined. Unlike with discretionary spending or even entitlement programs, the line item for interest payments cannot be altered except through other budget cuts.

The phenomenon is a bit like running up the down escalator. Without interest payments, the president’s plan would balance the budget by 2017. But net interest payments that year are expected to reach $627 billion, up from $207 billion in the current fiscal year.

“This goes to the heart of why we have to address our fiscal problems,” said Mark Zandi, co-founder and chief economist at Moody’s Economy.com. “If we don’t, we’re going to get swamped by our interest payments.”

Here is the part that worries me:

As bad as the outlook is in the Obama budget proposal for fiscal year 2012, it could get worse. So far, interest payments have been relatively low because of the willingness of global investors to lend the U.S. government money at abnormally low interest rates. But that could change.

“The scary scenario – which I am not predicting but is a real possibility – is an incident of capital flight, where investors lose confidence in the U.S., causing interest rates to rise precipitously and pushing the budget deficit even further into the red,” said N. Gregory Mankiw, a Harvard economics professor and former chairman of President George W. Bush’s Council of Economic Advisers.

The Obama budget’s assumptions include a substantial increase in rates. It predicts that the interest rate on 10-year Treasury notes will climb from 3 percent this year to 3.6 percent next year. It forecasts rates of 5 percent by 2015 and 5.3 percent at the end of the decade.

Short-term rates will rise even more sharply, from nearly zero now to 4 percent by 2015 in the Office of Management and Budget assumptions.

Rogoff calls the administration’s forecast “reasonable,” but he warns that the actual number is hard to know with any certainty.

“The basic issue is that when you hold a lot of debt you’re vulnerable to shifts in sentiment and sharp rises in the interest rates,” Rogoff said.

He said that combined federal, state and municipal debt in the United States is at a record high, beyond the famous post-World War II levels. Unlike interest payments made then, however, a huge portion of interest payments are flowing to investors in other countries, draining funds out of the U.S. economy. (There are other interest payments made to the Social Security fund, but because they shift money from one pocket of the government to another, they are not counted in the net interest numbers.)

Some positive developments could ease the interest payment crisis, including faster-than-expected economic recovery, higher-than-expected tax receipts and lower-than-expected government borrowing rates.

Ultimately, Rogoff said, the federal government should aim to reduce the amount of debt as a percentage of GDP. But for now, the U.S. government is still borrowing just to meet the interest payments on earlier borrowing.

“We are in a self-reinforcing, vicious cycle,” Zandi said

I am not trying to scare anyone at all; but no matter how you slice this, it does not look good for America in the next coming years. This is why; and I know I have said this on this blog a million times; well, a million and one now. This is why you do NOT spend yourself out of a recession. Keynesian economics just does not work. The only reason it ever even remotely appeared to work, was because of World War 2 and all of the industry that surrounded that era. In fact, some of the things that Roosevelt did, were overturned by the supreme court and after that, and only after that the did the economy begin to grow.

This is not to say that this is all President Obama’s fault. There was spending under Bush; just not quite as much. Here are some charts for you to look at:

Spending under Bush and Obama

But many Liberal Democrats will say, “What about the Iraqi war?”  I simply say to them, “what about it?”

See this graph:

Spending with and without the war, under Bush.

The truth is that the total cost of the eight-year war was less than the stimulus bill passed by the Democratic-led Congress in 2009, a fact confirmed by FOX News:

As President Obama prepares to tie a bow on U.S. combat operations in Iraq, Congressional Budget Office numbers show that the total cost of the eight-year war was less than the stimulus bill passed by the Democratic-led Congress in 2009.

According to CBO numbers in its Budget and Economic Outlook published this month, the cost of Operation Iraqi Freedom was $709 billion for military and related activities, including training of Iraqi forces and diplomatic operations.

The projected cost of the stimulus, which passed in February 2009, and is expected to have a shelf life of two years, was $862 billion.

The U.S. deficit for fiscal year 2010 is expected to be $1.3 trillion, according to CBO. That compares to a 2007 deficit of $160.7 billion and a 2008 deficit of $458.6 billion, according to data provided by the U.S. Office of Management and Budget.

My friends, this is why you do not spend your way out of a recession. This is what happens. America has lived well beyond its means for much too long. We must act, and we must act quickly. Before it is too late. So far, Republicans have NOT shown any backbone.  2012 is coming, it will be time to vote the rest of them out. Speaker Bonher; yes, I am talking about you! You piece of Neo-Conservative excrement! 😡

There is another thing that most up on Capital Hill are not discussing; and that is cutting Military spending. We need to end the war in Iraq NOW! They have their Country now, we defeated the insurgency.  We need to get out there ASAP! As for Afghanistan, who knows about that anymore, that is another Neo-Conservative boondoggle that the Democrats are trying to continue; good luck with that — Osama Bin Ladin is in Pakistan and that Country is not too keen on us being there. Again, I say — Good luck with that!

Not only this, but we have way too many of our Military stationed around the world. Why tell those people, either you pay us to be here or we are going home? It makes no sense, this is where Ron Paul has a point.