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The Problem with Debt Is That It’s Expensive


The Washington Post has a good article this morning on what underlies Obama’s dilemma. He wants to please the Left and spend more money — much more money — to create jobs (as if he could create jobs). But he can’t because he doesn’t have the money. Well, for once, I agree with the president. Not only doesn’t he have the money, he has a massive debt problem on his hands.

Over at The American, I published this chart showing the interests the government paid on the federal debt as a percentage of GDP between 1962 and today and the projected debt service payments up until 2082. The projections are illustrated under the current CBO baseline and under the CBO’s alternative, more realistic, scenario. For comparison, the graph also shows CBO’s projections for the cost of Medicare and Social Security as a percentage of GDP. Notice that under either of CBO’s scenarios, the net interest payments, or the costs of the debt, rival the cost of two of our nation’s most expensive social programs.

The Increasing Cost of Federal Debt

To give you an idea of what this means, if I get to retire at 65, in 2035, the cost of debt will have more than tripled from 1.8 to 7.5 percent of GDP. And by the time my daughter Juliette retires, in 2070 (assuming that she is still allowed to retire at 65) the cost of the debt will have reached 23.8 percent.

How much money are we talking about here? Well, currently, the interests we pay on our $12 trillion debt amount to roughly $200 billion. However, in ten years, interests alone will cost us over $700 billion. That’s a lot of money, and it’s likely to be much worse than projected here.

The whole article is here.

Happy Friday!