The Effect of Debt
It is the effect of debt that matters more than the debt itself.
That is what Keynesian macroeconomists like Paul Krugman and Robert Reich totally ignore to the detriment of this nation.
We can talk about current low interest borrowing rates until we are blue in the face, but that is inconsequential compared to the effects of debt itelf.
Today, I hope to put the cost of debt into proper perspective.
The Effect of Debt
As of today the national debt stands at $15.6 trillion. That number is so large that it is meaningless to most voters. The intelligentsia tells you not to worry about it.
The chart at right lists the budgets of a bunch of federal departments.
Those departments and their total 2010 budgets are:
- Transportation: $72.5 billion
- Veterans Affairs: $52.5 billion
- Department of State: $51.7 billion
- Housing and Urban Development: $47.5 billion
- Education: $46.7 billion
- Homeland Security: $42.7 billion
- Energy: $26.3 billion
- Agriculture: $26 billion
- Justice: $23.9 billion
- NASA: $18.7 billion
Their combined total is LESS than the INTEREST paid on the national debt in 2010.
Interest paid: $414 billion
Without debt this country could have funded all those programs without problem.
Interest paid is bigger now, but this puts things into proper perspective.
By the way, the budgets for these departments went up significantly in 2010. The Department of State’s budget, at nearly 41%, went up the most.
On the whole, budgets increased about 10% in a year seniors were denied a Social Security COPA increase because there was no inflation.
We are really lucky right now.
The cost of borrowing to pay government’s expenses is a bargain. Since Barack Obama was elected we have borrowed $4.3 billion per day to pay for ARRA and day-to-day government expenses at very low, near 2% interest rates.
For “stimulus” we reduced Social Security contributions for our national retirement plan every year since Obama was elected. That has been funded by low interest borrowing rates, too.
That is all about to end.
What is not about to end is the interest we waste “servicing” the national debt. Its nearly 11% of the total federal budget right now (including interest owed on Social Security and such). That is about to increase. How much it will increase nobody knows, but 2% interest rate borrowing is history.
If this nation does not get serious about reducing it’s ginormous debt “servicing” soon then there will be no American Dream.
Remember that when you are at the ballot box this year.