Monday, November 23, 2009 1:51 PM
A page one, top-of-the-fold New York Times report Monday warns that U.S. debt is rising so fast that the federal government is careening toward a “payment shock” in the not-too-distant future.
The Times lead headline read: “Federal Government Faces Balloon in Debt Payments: At $700 Billion a Year, Cost Will Top Budgets for 2 Wars, Education, Energy.”
The Times headline appears eerie just as the Senate moves to push forward on a radical healthcare reform — with CBO estimates for a final bill costing nearly $1 trillion dollars over the next year.
The national debt now stands at over $12 trillion and the White House estimates that the cost of servicing the debt will rise to more than $700 billion a year in 2019, up from $202 billion this year. The Times suggests that $700 billion annual payment cost may be conservative.
The additional $500 billion a year in interest payments would surpass the combined budgets this year for education, energy, homeland security, plus the wars in Iraq and Afghanistan, the Times observes.
Treasury officials face not only huge new debts incurred in response to the economic meltdown but a balloon of short-term borrowings coming due in the months ahead, and interest rates that are certain to return to normal levels when the Federal Reserve concludes that the fiscal emergency has passed.
“Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages,” The Times reported on Monday.
By Bill Sammon
Barack Obama, who lamented Friday that “we have not managed our federal budget with any kind of discipline,” is nonetheless promising to spend $50 billion on a United Nations anti-poverty program that critics say will drive up American debt.
“The short-term weakness in the capital market is a reflection of long-term problems that we have in our economy,” Obama told reporters in Florida. “We have been loading up enormous amounts of debt.”
Yet Obama and his running mate, Joe Biden, have pledged tens of billions in new spending on a U.N. program that promises cash to poor countries. The program is one of eight sweeping “Millennium Development Goals” the U.N. adopted in 2000.
“Obama and Biden will embrace the Millennium Development Goal of cutting extreme poverty around the world in half by 2015, and they will double our foreign assistance to $50 billion to achieve that goal,” the candidates vow in their campaign platform.
Johns Hopkins professor Steve Hanke said such spending would merely drive up American debt, while doing almost nothing for the world’s poor.
“It goes down a bureaucratic rat-hole, lining the pockets of people who are connected to the power structure,” said Hanke, a senior fellow at the Cato Institute. “It’s basically a system to redistribute income from middle class people in the United States to rich people in poor countries. It never reaches those people who are living on a dollar a day.”
Hanke said such expenditures are especially unwise in the wake of significant expansions of government and spending during President Bush’s tenure.
“We’ve been spending like drunken sailors and making obligations into the future like drunken sailors,” he said. “We’re on an unsustainable path in terms of the fiscal situation in the United States because of massive spending growth and commitments.”
Obama said he wants to curtain at least one of those costly commitments.
“We have spent well over half a trillion dollars — soon to be a trillion dollars — on a war in Iraq, despite the fact that Iraqis are now running surpluses,” the Illinois senator said Friday. “We’re still spending $10 billion a month there.”
But in December, Obama also sponsored the Global Poverty Act which, if passed, would require the president to commit to cutting global poverty in half by 2015. Critics say that would cost American taxpayers $845 billion.
Susan Rice, one of Obama’s top foreign policy advisers, says the U.S. should give 0.7 percent of its Gross Domestic Product to developing nations.
Bill Sammon is Washington deputy managing editor for FOX News Channel.
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