This post is from Red State.
Despite his promises to cut the deficit in half by the end of his “first” term, Obama racked up the largest deficits in U.S. history:
- FY2009: The federal budget deficit was $1.413 trillion, the highest in U.S. history. (“Monthly Budget Review: November 2011,” Congressional Budget Office, 11/7/11)
- FY2011: The federal budget deficit was $1.299 trillion, the second highest in U.S. history. (“Monthly Budget Review: November 2011,” Congressional Budget Office, 11/7/11)
- FY2010: The federal budget deficit was $1.294 trillion, the third highest in U.S. history. (“Monthly Budget Review: November 2011,” Congressional Budget Office, 11/7/11)
- FY2012 The federal budget deficit was $1.090 trillion, the fourth highest in U.S. history. (“An Analysis of the President’s 2013 Budget,” Congressional Budget Office, 10/5/12)
You shouldn’t be shocked by Obama’s failure to reduce the deficit in half by the end of his first term in office. He did warn us there would be “trillion-dollar deficits for years to come.”
Interest expense on the national debt is what sinks countries. The zero interest rate environment we have today masks the problem. When we return to normal interest rates, say 6%, our interest expense will jump to approximately to 25% of tax receipts. We have recently seen what happens to countries with debt problems similar to ours. Spain, Portugal, Greece, and Argentina all brought to their knees by excessive debt.
Heritage Foundation economist Stephen Moore:
Here is the biggest worry about an $18 trillion debt: What happens if/when interest rates start to drift back upward? Answer: This is the economic equivalent of the nuclear option.
Each 1-percentage-point rise in interest rates causes the U.S. deficit to rise by more than $1 trillion over ten years. So a 300-basis-point rise in rates — nothing more than a return to normalcy — would mean about $5 trillion in federal deficits.
If that happens, the debt-servicing costs grow astronomically and interest payments would become the biggest expense item in the budget. We start to pay more and more taxes just to finance past borrowing. This is what happened in Detroit; look at how that turned out.
Maybe this debt bubble won’t burst. Let’s pray that it doesn’t. If it does, the 2008–09 real-estate crash could look like a picnic by comparison.
[…]Oh, and we’re still borrowing half a trillion a year, so the debt will likely hit $20 trillion sometime before 2018. Have a nice day.
In 2007, when Nancy Pelosi and Harry Reid took over the spending, the national debt was only 8.5 trillion!
I am really hoping that interest rates will go up. Not only would it help me personally to get a predictable return on my investments, but I would like the people who voted for the Democrats to perceive (when it blows up) that lowering interest rates and borrowing trillions of dollars was not the right way to achieve real economic growth. The economy looks better if you throw 10 trillion dollars of borrowed money at it, but it’s not sustainable. In fact, it seems as if the left is always trying to wreck the economy with one bubble or another. It’s not just reducing mortgage lending requirements to create a housing bubble, it’s reducing student loans requirements to create a higher education bubble, and it’s reducing interest rates to create a debt bubble. It’s almost as if they were trying to destroy the economy.