- The Washington Times - Friday, June 11, 2010

ANALYSIS/OPINION:

Each American’s share of the total U.S. debt will grow to $60,000 in the next five years unless Congress and the Obama administration reverse their reckless spending habits. Treasury budget projections released last week show that red ink will swell to $19.6 trillion by 2015. If President Obama wins re-election in 2012, he could easily be responsible for doubling the national debt on his watch. It stood at $10.6 trillion when he took office, which is starting to sound quaint.

With a gift for understatement, Federal Reserve Chairman Ben S. Bernanke called this an “unsustainable path” in testimony to the House Budget Committee on Wednesday. A closer look at the numbers suggests we’re in worse shape than described. The Congressional Budget Office (CBO) assumes 4 percent growth in gross domestic product from 2011 to 2014, which most experts consider an overly optimistic assumption. The Wall Street Journal’s latest survey of 53 economists and forecasters found an expectation that the economy would grow at just 3.1 percent next year, which is a paltry rate following a recession, let alone a severe recession. Without growth, tax revenue will remain lower than expected and deficits will rise.

The Treasury also faces the possibility of having to pay higher interest rates - just like the government of Greece - as creditors become increasingly anxious about the U.S. government’s high level of debt. As the percentage of government spending devoted to interest payments rises, bond ratings can fall. As bond ratings fall, interest on the debt rises. What once appeared to be a manageable problem quickly turns into a vicious cycle.

Under the Obama budget, CBO predicts that interest payments will eat up 18 percent of federal revenue in 2018 and 20 percent in 2020. Moody’s Investors Service, one of the agencies that determines bond ratings, estimates that interest payments could exceed the critical 20 percent level as early as 2013. This could cause U.S. government bonds to slip from AAA to AA status, which would be a warning that the credit quality of U.S. bonds is becoming less reliable.

America’s financial condition will continue to erode as Democrats refuse to curtail orgiastic government spending. The tally continues to rise. On top of the $826 billion stimulus and the $400 billion supplemental spending bill are a bloated proposal for a “jobs” bill and numerous other wasteful pork-laden initiatives. As the ever-increasing debt spirals further out of control, Americans should pray that the courts strike down as unconstitutional the Democrats’ expensive takeover of the health care system. That would be a small but necessary start to come to grips with our spending addiction and the resultant debt disease.

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