Rise of the debt interest monster
CNN Money takes a look at an increasingly formidable beast crawling from the cobwebbed vaults of the beyond-bankrupt U.S. Treasury:
Interest rates on U.S. bonds may be ridiculously low, but that doesn’t mean the country’s future interest payments on the national debt will be.
Uncle Sam will shell out more than $5 trillion in interest payments over the next decade, according to the latest projections from the Congressional Budget Office.
The CNN report offers some perspective by describing these projected interest costs as “higher than Medicaid spending, equal to half of Social Security spending, and close to what is spent on all of defense.”
And that’s likely the best-case scenario, as a one-percent increase in the rate of interest paid on the national debt “could add roughly $1 trillion to interest costs over the next decade.”
None of this is really new information – the CBO is joining a chorus of analysts who have been warning about skyrocketing debt costs in the coming years. The CBO does not like to build debt interest into its economic forecasts, because variables such as interest rates are too difficult to predict five or ten years out. As alarming as their new forecast is, they could be lowballing the numbers for later years by as much as fifty percent, because the kind of credit rating collapse that has roiled the more insolvent European nations would radically increase Uncle Sam’s cost for borrowing money. Remember, the current per-capita debt of United States citizens is currently much higher than it is for Greeks – $44,000 each for every America, versus $33,000 for Greeks.
The CBO is also limited by its ten-year projection window, because utter debt catastrophe is easily predictable a bit further out. Last year, House Budget Committee Chairman Paul Ryan released a set of projections, one of which is the now-infamous “Tidal Wave of Debt” chart that reduced Treasury Secretary Tim Geithner to a stammering wreck at recent hearings, after Ryan revised it to include President Obama’s ridiculous 2013 budget proposal. Another, less renowned chart takes government debt with interest out to 2080, and shows how interest payments steadily grow until they surpass all other budget items.
According to Ryan’s projection, interest on the national debt will match what we currently spend on everything except entitlements by 2040, consume all federal revenue before 2060, and devour over 40 percent of our gross domestic product by 2080. Nearly half of everything Americans produce would be lost paying the interest on Uncle Sam’s credit cards.
Even this projection dramatically understates the danger facing us, because debt interest will become an unsustainable burden long before then. For one thing, the only reason the world’s credit agencies haven’t already agreed to downgrade America’s credit rating more severely is the increasingly forlorn hope that we’ll address out-of-control government spending. They’ll give us considerable leeway, because they really don’t want to pull that trigger, but they’ll feel compelled to take action long before the CBO’s highly optimistic projections for 2023 are realized, if we don’t change course very soon.
Also, the growth of debt interest will soon intersect with the growth of entitlement spending, as irresistible forces meet immovable objects. The Heritage Foundation released a study last year that revealed spending on Medicare, Medicaid, and Social Security would also consume one hundred percent of federal revenue by 2049… which is roughly the same time Paul Ryan says interest will devour it all! Obviously, those mandatory spending forces will meet with a horrifying fiscal impact long before 2049. At some point in the very near future, entitlements and debt interest will grab 50 percent of revenue apiece, squeezing everything else – including national defense – completely out of the picture. .
And there’s a third budget-devouring entitlement predator on the prowl: ObamaCare. This one’s much younger than the others, but it’s extremely aggressive. Its costs are already a trillion dollars beyond the fanciful promises Obama peddled to the public in 2009, and if the anticipated collapse of private insurance occurs – as private insurers go bankrupt under ObamaCare’s mandates, and employers feel increasingly motivated to stuff their employees into ObamaCare’s government-run “public exchanges” to escape the carnage – the deficit will be blown past lunar orbit.
Would anyone like to project the point at which ObamaCare, Medicare, Medicaid, Social Security, and debt interest consume the entire federal budget? I’ll go out on a limb and guess it’s not long after 2020… and that guess doesn’t factor in the dynamic effects of a collapsing private sector providing decreased revenue to the federal government. The Ryan and Heritage forecasts of budgetary doom assume federal revenue remains relatively constant. The pressure from tax-crazed liberals to push us down the wrong side of the Laffer Curve with huge tax increases, reducing revenue by pumping up rates, will become irresistible long before 2020.
That pressure is already mounting, of course, and certain elements of the media will do everything they can to support the ridiculous narrative that a President whose second term would witness him doubling the national debt single-handedly just needs a little more money from those greedy “millionaires” to balance the books. For example, CNN Money’s report this morning frets that our national debt will increase by $11 trillion in the coming decade if “a host of expensive policies” are extended. They give precisely one example of such an expensive policy. Would you like to guess what it is?
That’s right: the hated Bush-era tax cuts. Really, CNN? Really? You can’t think of any other “expensive policies” to name, other than maintaining our current tax rates?
But wait, it gets better. At the end of the report, CNN wrings its hands over how much the GOP candidates could increase debt interest with their economic plans, based on a widely reported but laughable analysis from the “Committee for a Responsible Federal Budget” – which, for example, lists “transforming various social programs into block grants to states and capping their growth” as Rick Santorum’s biggest cost-saving idea, and somehow completely forgets to mention that he wants to balance the budget in four years through the end of “baseline budgeting” and annual spending cuts.
Also, the L.A. Times notes in passing that the Committee feels free to dismiss economic history with a wave of its hand, and “dismissed GOP assertions that tax cuts would pay for themselves by spurring economic growth.” We are meant to believe these plans could somehow be worse for the national debt than giving President Stimulus another four years to spend our children’s money like water and crush the private sector.
That’s why the Debt Interest Monster has a good chance of devouring us all. A narrative of static decay is being set into place, in which the concept of economic growth through reduction of government is simply dismissed out of hand, spending cuts are presumptively impossible, and one dollar of new taxes brings one dollar of government revenue. The terrifying bulk of debt interest will be used as a cudgel against any plan that doesn’t pass the most absurdly rigid static-analysis tests, while ludicrous promises about revenue from tax increases, and assurances that the next Big Government program will be the first one that ever came in on-budget, will be accepted without serious question. Thus will the feral beast Big Government created be leashed, and transformed into its attack dog.