If you’ve lived in the American South then you know what kudzu is. With its typical brilliance the US government instituted an erosion control program in the 1930s that had Civilian Conservation Corps workers plant the invasive Asian vine all over the South and Midwest.
As with so many government programs, this was a major blunder. Unless kudzu is actively controlled it grows like cancer. A kudzu vine can grow 60 ft. in a year. Since the 30s, the plant has taken over fields, choked forests, and even destroyed isolated buildings. The vine silently swallows everything in its path turning the landscape into a desolate field of green.
However, kudzu is a plant and if you exert some effort you can control and eradicate it, mitigating this instance of government stupidity. But we have another, much more ominous, kudzu-like government problem looming on the horizon …
… the interest on the federal debt.
Remember when W was President? Hardly a day passed that some liberal talking-head didn’t remind us how Bush-43 was running up the national debt. It was going to impoverish all of us and turn us into Chinese slaves. Then, on January 20, 2009, the problem magically disappeared! How often have you heard CNN, NBC, ABC, CBS, NPR, The New York Times, The Washington Post, or Huff-Po mention the debt in the last eight years? Occasionally? A few times? Never?
The average American thinks that the debt problem has gone away. But it hasn’t. Like kudzu growing at the edge of your land, the federal debt has been growing silently, getting more massive every day, and it will soon be threatening your very livelihood.
But unlike the plant that plagues the South, it’s not the sheer weight of the debt that will crush us. The debt has a secondary characteristic that will act much sooner – the interest on the debt. If kudzu emitted poison then that is what the interest would be.
The federal debt, which currently stands at just under $20 trillion, can be “rolled over” when it comes due. In other words, new bonds are issued to borrow money that is then used to pay off the maturing bonds and the net effect on the budget is zero. And new debt can be borrowed from investors as long as the feds are willing to pay a high enough “price” to get the money. That “price” is the interest that we pay on the debt.
The real problem isn’t how much debt the government owes (though it does matter indirectly). The real problem is the price the feds have to pay to keep borrowing all that money, because that price – the interest – must be paid EVERY year.
And the price is starting to go UP! The 10 year T-bond rate is 50% higher than it was in June. The 5 year rate is 67% higher. And the 1 year T-bill rate has soared 750% in just 2 years!
As anemic as the US economy has been since the real estate crash in 2007-2009, it has been doing better than the economies of most other countries. For the last eight years, America has been the most beautiful “woman” on Ru Paul’s Drag Race. Because of that, investors have been falling all over themselves to lend us money while demanding a low price. Thus interest rates have been at historic lows. Currently the feds only have to pay 1.24% on the $20 trillion that we owe. That’s the good news.
And that is the ONLY good news. The rest sucks like Madonna campaigning for Hillary votes.
Even with this low low rate, the interest on the debt costs US taxpayers $241 billion. For every $14 you send the government $1 is used to pay the price for borrowing money. That may not sound like much but remember interest rates are unusually low right now. The average rate the feds paid over the last 35 years is 4.01%. If rates return to a more normal level then the interest will jump to $779 billion. At the current level of taxes collected that means that $1 out of every $4 you send Washington would go to pay interest.
Think about that. You send the government $4 and they use $3 to build roads, send remote-control buggies to Mars, bomb innocent children in Syria, and pay country club fees for rich retirees. And that other $1? It gets you …. Absolutely nothing!
But these numbers only hold up if the feds stop borrowing money today. And you know those pandering pinheads are not going to do that. This story is about to get much worse.
Since 1980 the federal debt has gone up 8.88% per year (compounded average). If this long-term growth rate continues then the debt will double again in 8 years to $40 trillion. Assuming we have returned to 4% interest rates by then, the taxpayers will have to pay out $1.6 trillion EVERY YEAR to the folks we owe money.
Yeah, but the government will be bringing in more revenue in 8 years so that’s not really a big deal, right?
Since 1980 federal revenues have only grown by 5.25% per year. That means the funds needed to cover the interest, and all the other swell things the government does, will only go up by 50% – half as much as the debt will rise.
In 8 years, for every $3 the feds steal from you, $1 will be for interest. That’s 1/3 of the money you send to Washington doing zero, nada, nilch, bubkiss!
So the government will have to cut spending, right?
Who are you kidding?! You know damn well they aren’t going to do that. And because so much tax money will be used to treat the interest payment cancer the amount of borrowing the feds will have to do will go up. The scenario I’ve presented here is a best-case scenario. It’s actually conceivable that by the time the Trump and Warren Presidencies (did I just send a shiver down your spine?) are completed, EVERY tax dollar you send Washington will be used to pay interest on the debt. The country will no longer be able to fund the government.
When that happens the shit will hit the fan.
The kudzu is quietly creeping up on you and soon it will grab you by the throat and squeeze the living daylights out of you.
A Special Note to my Republican Friends
You can wipe that smug smile off your face. The Democrats didn’t do this … you did!
Since Ronald Reagan was inaugurated in 1981, team Red has controlled either the House of Representatives or the Presidency or both for 22 of 26 years. ALL bills regarding taxation and spending must originate in the House and be signed by the President (or override his veto) in order to become law.
Thus, for 22 of the last 26 years your party had the ability to slow or even stop the growth of the national debt. Did your party do that? Hell no!
At the beginning of 1981 the debt stood at $909 billion. Since then the debt has grown by $18,524 billion (nominal dollars), a rise of 1,938%! Of the total increase, the Stupid Party is responsible for $15,067 billion (or $15.07 trillion).
Of the current total debt, 77% is directly attributable to what your team has been doing since 1981! US taxpayers will be forced to pay out $186 billion in interest this year, for which they will get nothing in return, because of the hypocrites you voted for!
Republican politicians are lying to you. They are NOT the party of limited government. They will NOT do anything to avert the disaster that is sneaking up on us. They are going to screw you, your children, and your grandchildren. Stop sending these assholes to Washington.