Coming Home to Roost

The US government is about to get socked with a huge bill - paying back the borrowed money. Now not all of this can be laid at the feet of the President although he has spent like no one before him. President Bush was quite the spendthrift as well. Here is how the NY Times puts it.

The United States government is financing its more than trillion-dollar-a-year borrowing with I.O.U.’s on terms that seem too good to be true.

But that happy situation, aided by ultra-low interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the 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.

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.

The potential for rapidly escalating interest payouts is just one of the wrenching challenges facing the United States after decades of living beyond its means.

How are we ever going to dig out of this hole if the Democrats manage to add more and more programs to the federal budget.