I hate to interrupt Obama’s “We Don’t Have a Spending Problem” World Tour. But reality intervened on Tuesday as the Congressional Budget Office released a report that says that the budget deficit will grow through 2023 and “will eventually require the government to raise taxes, reduce benefits and services, or undertake some combination of those two actions,” reports CBSNews- and all of that just to cover interest payments.
“In its annual Budget and Economic Outlook,” writes CBSNews, “the CBO said debt held by the public will be bigger by 2023 than in any year since 1951 and will be at 77 percent of gross domestic product (GDP) by 2023, far above the 40-year average of 39 percent of GDP. As a result, the CBO report said, the federal government’s interest costs ‘will be very high’ and will be rising. Interest costs will more than double by the end of the ten-year forecasting period.”
The CBO projects that interest rates on the Ten-Year Treasury Note will rise from 2.1 percent currently, to 5.2 percent in 2017.
In December, the Treasury Department reported that total interest bearing debt owed by the government carried an interest rate of 2.523 percent. Last year’s interest payments on that debt totaled $360 billion. If interest rates overall reflect the CBO’s forecast for the benchmark, interest rates payments alone will reach one trillion dollars by 2017.
Just current debt would require interest payments of 2.5 times 2012 levels or $890 billion. You can add another $100 billion in interest costs for deficits accumulated between 2013 and 2017.
If interest rates cooperate, interest on the national debt will be the third largest line item in the budget by 2017, after pensions and healthcare, topping defense spending, education, welfare and likely even Obama’s vacation budget.
If interest rates don’t cooperate and they become infected by inflation, or silly things like…I don’t know…RISK anyone?... then look for interest payments to be the top and biggest line item in any budget.
So technically Obama doesn’t have a spending problem.
Obama will be out of office by 2017, so yeah, HE doesn’t have a problem spending all that borrowed money. It’s all of us suckers who have to live in the country after he’s done with it who will have to make the choice between cat food and really large interest payments on the national debt.
The other thorny problem with the CBO forecast is that after this year the report is contingent upon the economy growing “at its maximum sustainable level.”
The CBO pegs GDP growth as modest this year-again- but bets the farm that GDP growth will hit “3.4 percent in 2014 and an average of 3.6 percent a year from 2015 through 2018.”
No offense to the folks at the CBO, but really they should let politico-comedian David Letterman report economics and go to writing jokes full-time. Since 2000, the US economy has grown above 3 percent only twice, 2004 and 2010. With 2 years of getting hits and the other years striking out, that’s not even a batting average.
That’s a disaster.
No doubt higher government spending could give the economy a temporary boost, as it did in the third quarter of 2012, just in time to save Obama’s re-election campaign. But we’ve plunged from an annual rate of 3.1 percent growth in the third quarter to recessionary activity in the 4th quarter.
If government spending was all that it was cracked up to be, wouldn’t the third quarter have kick-started the economy, rather than killing it?
While idiots like Ezra Klein of the Washington Post argue that government spending needs to be much, much higher and payrolls for the federal government need to be expanded rather than contracted, the result would be catastrophic.
As it is, if we do nothing and let current federal tax rates and spending drift, we’ll spend more on interest than we do on education.
And Democrats, you have a problem: Tell them in 2017 how much you care about kids.