New York Times: U.S. Racing Toward Debt ‘Shock’

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.

http://moneynews.newsmax.com/headlines/nyt_us_debt_shock/2009/11/23/289782.html?s=al&promo_code=91C9-1

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