“Worries Rise on the Size of U.S. Debt” - New York Times
By Daniel at 5 May, 2009, 4:46 am
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“The nation’s debt clock is ticking faster than ever — and Wall Street is getting worried.
As the Obama administration racks up an unprecedented spending bill for bank bailouts, Detroit rescues, health care overhauls and stimulus plans, the bond market is starting to push up the cost of trillions of dollars in borrowing for the government.
Last week, the yield on 10-year Treasury notes rose to its highest level since November, briefly touching 3.17 percent, a sign that investors are demanding larger returns on the masses of United States debt being issued to finance an economic recovery.
While that is still low by historical standards — it averaged about 5.7 percent in the late 1990s, as deficits turned to surpluses under President Bill Clinton — investors are starting to wonder whether the United States is headed for a new era of rising market interest rates as the government borrows, borrows and borrows some more.
Already, in the first six months of this fiscal year, the federal deficit is running at $956.8 billion, or nearly one seventh of gross domestic product — levels not seen since World War II, according to Wrightson ICAP, a research firm.
Debt held by the public is projected by the Congressional Budget Office to rise from 41 percent of gross domestic product in 2008 to 51 percent in 2009 and to a peak of around 54 percent in 2011 before declining again in the following years. For all of 2009, the administration probably needs to borrow about $2 trillion.
The rising tab has prompted warnings from the Treasury that the Congressionally mandated debt ceiling of $12.1 trillion will most likely be breached in the second half of this year.
The trouble is that government borrowing risks crowding out private investment, driving up interest rates and potentially slowing a recovery still trying to take hold. That is why the Federal Reserve announced an extraordinary policy this year to buy back existing long-term debt — $300 billion over six months — to drive down yields. The strategy worked for a while, but now the impact of that decision appears to be wearing off as long-term interest rates tick up again.
Then there is the concern that the interest the government must pay on its debt obligations may become unsustainable or weigh on future generations. The Congressional Budget Office expects interest payments to more than quadruple in the next decade as Washington borrows and spends, to $806 billion by 2019 from $172 billion next year.”
The full article is at:
http://www.nytimes.com/2009/05/04/business/economy/04debt.html?_r=1&em
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And that debt doesn’t include the debt to the now negative cash flow Medicare and soon to be, negative cash flow S.S. trust fund either later this year or next.
That means we have to borrow to make up all short falls because all the trust funds have is IOU’s. The government even borrows the interest back they pay to the trust funds.
Debt to the Penny breaks it down between public and inter-government holdings like those in the trust funds (includes FDIC IOU’s, too).
05/01/2009
Public $6,927,622,336,982.99
Inter-government $4,280,453,855,317.56
Total $11,208,076,192,300.55 Way more than 51%
http://www.treasurydirect.gov/NP/BPDLogin?application=np
Counting unfunded liabilities according to a report I heard this weekend, the total is $65 trillion.
That number has jumped because of the decline in payroll taxes throwing all projections on the trust funds by years. S.S. wasn’t supposed to go negative cash flow until 2017 and now that has been moved up to this year which also destroys the 2047 date when they said it would run out of even the IOU’s it holds.
Again, all money has to be borrowed or printed that we need for shortfalls to Medicare and soon, Social Security. The GAO warned 4 years in a row to Congress that this was unsustainable.
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