Resistance Begins at Ohm!

Tuesday, November 24, 2009

Interest payments in the future

Look, the fact that the national debt has gone from 2tri to 12tri is worrisome just because it grew so fast. We never really think about paying down the principle on the debt, it just keeps inching up, right? As long as GDP goes up, we can afford the incremental increase in interest payments, right?

Interest payments alone are going more than triple in 10 years. Like think of it this way. You are paying $200 on your credit card now. In 2019, if you do nothing to pay down the principle, you are going to be paying $700 per month. It's just money going out the door (to China) without earning anything or doing anything productive (like build roads or schools). Yep, just money out the door before it even lands in the wallet. Consequence? Read on... (hint: health care ain't got nuthin on this problem, at least paying for health care contributes to the economy).

(Talk about your hockey stick graph.)

With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.

In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.

CNBC from the NYTimes

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