Obama’s Debt Crisis
How much is the National Debt costing America?
It’s interesting to note that the total interest paid on the National Debt since 1988 has been $7,393 billion (that’s $7.4 trillion). That’s a lot of money being wasted by politicians in Washington, D.C. and there are not enough people talking about it. There is an even more deafening silence regarding what the cost will be over the next 10 years. The United States will pay almost as much interest as it did over the last 20 years in just the next 10. And no one in Washington is addressing the Debt Crisis. I would to God that somebody would wake them up before it’s too late.
Plan A – Pay the Debt Now
The National Debt is currently $12,087 billion (that’s $12 trillion). If principal and interest payments were made over the next 30 years at 4.0% interest, the total remaining interest cost would be $8,883 billion (that’s $8.9 trillion). The total annual P&I payment would be $699 billion or roughly 31% of current government revenues (click on the chart below). But since it’s not likely that this plan will ever see the light of day, what is Plan B?
Plan B – Ignore the Debt until 2019
The National Debt is projected to grow to $19,224 billion (that’s $19 trillion) by the year 2019. This is calculated by adding the CBO’s projected budget deficit of $7,137 billion to our current debt. If the debt is not addressed until 2019, the cost of interest over the next 10 years would be $6,271 billion, since no principal payments will have been made (see chart below). Then, assuming that a plan is put in place to pay the debt off over the ensuing 30 year period, ending in fiscal year 2050, the total cost of interest over the next 40 years will be $20,397 billion (that’s $20.4 trillion). If the government starts making payments after 2019, the annual P&I payment would be around $1.1 trillion or 49% of current government revenues.
Obama’s Debt Crisis
If we address the National Debt now it will cost roughly $8.9 trillion in interest. If we wait until 2019 it will cost closer to $20.4 trillion in interest. If we never address our debt and continue to treat it as an interest only loan, then this number will “skyrocket”. In fact we may already be at the point of no return.
This is Barack Obama’s failure. Obama talks the talk but he doesn’t walk the walk. Obama will cost America $6.3 trillion in interest over the next 10 years by his failure to address the national debt. Add that to his $7.1 trillion (and rising) budget deficit and Obama will have cost America at least $13.4 trillion. So any success that Obama touts short of $13.4 trillion in savings, revenue or benefits is a joke.
What consequences could American’s face if the debt is not dealt with? Well, for one interest rates are currently at an all time low, and there is only one direction they can go, up. When interest rates begin to rise, so will the cost of the debt. As shown here, if interest rates rise to 5.0% and the debt is not brought down by fiscal year 2050, then the total interest cost jumps from $20.4 trillion to $36.8 trillion. That’s about the equivalent of three times annual GDP wasted on interest payments.
Also, the United States could lose its AAA-credit rating. Once AAA status is gone it will be tougher for the nation to borrow money and lenders will charge higher interest rates. Lenders may also begin to impose stringent standards on our nation’s fiscal policies. Don’t forget that a lot of this borrowed money comes from foreign countries. In other words, if we don’t deal with the debt now it will only cost more in the future and we could potentially lose some of our freedom in the process.
Is Congress Brain Dead?
When Congress talks about saving the country a couple of hundred billion over 30 years, by passing a health care entitlement bill, I can’t help but wonder if anyone is awake at the helm. Congress is on the path of costing the country roughly $6.3 trillion in interest over the next 10 years, plus another $14.1 trillion over following 30 years, and these are probably low-ball figures, and what are they up to? Telling us how they will save a few pennies by adding a few trillion more to the National Debt. Yet, if Congress fails to address the Debt by 2019, the interest costs will soar well beyond the $20 trillion mark.
Those who truly love this country could care less about the Congress saving $200 billion on a new entitlement program. I could especially care less since I know that it will cost 5 times as much to implement and more down the road. Don’t talk to me about Health Care reform while your back is turned on the more pressing $20 trillion problem. Will somebody please wake up the Congress, the Media, and the Borrower in Chief? Wake them up before it’s too late.
Note: This posting is based on the following assumptions: (1) that interest rates are fixed at 4.0%, and (2) that the debt is repaid over a 30 year term.