The New York Times is catching up to Saturday Night Live. It’s a sad state of affairs when, as we wrote in the past few days, Americans must rely on not funny comedy shows which produce skits closer to the truth than Big Media “news” outlets.
We posted the Saturday Night Live skit earlier but it bears rewatching.
Close to a trillion debt to China… serious recession…. how many jobs has the “stimulus” created? – so far, none…. how exactly is extending health care coverage to 30 million people going to save you money?… I know what a “clunker” is…. Each of your plans to save money involves spending even more money – this does not inspire confidence… I suppose if I really wanted to get our money I could call and say I was a Wall Street banker who needs his bonus…. What steps?…. Do I look like Mrs. Obama… Why are you talking to me like I was Mrs. Obama?…
The day before we posted the Saturday Night Live skit, we wrote about the ugly reality of the numbers and the bad math that is not going away.
Today, the New York Times follows the “comedy” skit and our earlier “math” post, with even more frightening math and numbers:
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 ultralow 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.
Americans have never faced numbers like these before. If Obama was purposefully seeking to destroy the country, he could not do a better job than continue to run up the Chinese credit card.
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.
We’ll be derided as “deficit hawks” by those that don’t care about paying the bills and not running up more debt. The American government has been “living beyond its means” for a long time.
Americans now have to climb out of two deep holes: as debt-loaded consumers, whose personal wealth sank along with housing and stock prices; and as taxpayers, whose government debt has almost doubled in the last two years alone, just as costs tied to benefits for retiring baby boomers are set to explode.
Are we the only ones paying attention? Will anyone cut that Chinese credit card in half and live in reality?
The problem, many analysts say, is that record government deficits have arrived just as the long-feared explosion begins in spending on benefits under Medicare and Social Security. The nation’s oldest baby boomers are approaching 65, setting off what experts have warned for years will be a fiscal nightmare for the government.
“What a good country or a good squirrel should be doing is stashing away nuts for the winter,” said William H. Gross, managing director of the Pimco Group, the giant bond-management firm. “The United States is not only not saving nuts, it’s eating the ones left over from the last winter.”
The current low rates on the country’s debt were caused by temporary factors that are already beginning to fade. One factor was the economic crisis itself, which caused panicked investors around the world to plow their money into the comparative safety of Treasury bills and notes. Even though the United States was the epicenter of the global crisis, investors viewed Treasury securities as the least dangerous place to park their money.
On top of that, the Fed used almost every tool in its arsenal to push interest rates down even further. It cut the overnight federal funds rate, the rate at which banks lend reserves to one another, to almost zero. And to reduce longer-term rates, it bought more than $1.5 trillion worth of Treasury bonds and government-guaranteed securities linked to mortgages.
As bad as things are now, get ready, it’s going to get worse. Much worse, and soon.
Those conditions are already beginning to change. Global investors are shifting money into riskier investments like stocks and corporate bonds, and they have been pouring money into fast-growing countries like Brazil and China.
The Fed, meanwhile, is already halting its efforts at tamping down long-term interest rates. Fed officials ended their $300 billion program to buy up Treasury bonds last month, and they have announced plans to stop buying mortgage-backed securities by the end of next March.
Eventually, though probably not until at least mid-2010, the Fed will also start raising its benchmark interest rate back to more historically normal levels.
The United States will not be the only government competing to refinance huge debt. Japan, Germany, Britain and other industrialized countries have even higher government debt loads, measured as a share of their gross domestic product, and they too borrowed heavily to combat the financial crisis and economic downturn. As the global economy recovers and businesses raise capital to finance their growth, all that new government debt is likely to put more upward pressure on interest rates.
Even a small increase in interest rates has a big impact. An increase of one percentage point in the Treasury’s average cost of borrowing would cost American taxpayers an extra $80 billion this year — about equal to the combined budgets of the Department of Energy and the Department of Education.
Much worse, much sooner:
The White House estimates that the government will have to borrow about $3.5 trillion more over the next three years. On top of that, the Treasury has to refinance, or roll over, a huge amount of short-term debt that was issued during the financial crisis. Treasury officials estimate that about 36 percent of the government’s marketable debt — about $1.6 trillion — is coming due in the months ahead.
To lock in low interest rates in the years ahead, Treasury officials are trying to replace one-month and three-month bills with 10-year and 30-year Treasury securities. That strategy will save taxpayers money in the long run. But it pushes up costs drastically in the short run, because interest rates are higher for long-term debt.
Adding to the pressure, the Fed is set to begin reversing some of the policies it has been using to prop up the economy. Wall Street firms advising the Treasury recently estimated that the Fed’s purchases of Treasury bonds and mortgage-backed securities pushed down long-term interest rates by about one-half of a percentage point. Removing that support could in itself add $40 billion to the government’s annual tab for debt service.
The destruction is undeniable. The Incan disaster of 2012 might come much sooner. The Treasury Department knows the Obama shell game cannot continue:
This month, the Treasury Department’s private-sector advisory committee on debt management warned of the risks ahead.
“Inflation, higher interest rate and rollover risk should be the primary concerns,” declared the Treasury Borrowing Advisory Committee, a group of market experts that provide guidance to the government, on Nov. 4.
“Clever debt management strategy,” the group said, “can’t completely substitute for prudent fiscal policy.”
Reality is both an irresistible force and an immovable object. If you elect a boob, expect boobery.
William Cullen Bryant wrote “Truth, crushed to earth, shall rise again“. The truth is rising.
William Shakespeare (Hamlet, Act I, Scene 2) wrote: “Foul deeds will rise, Though all the earth o’erwhelm them, to men’s eyes.”
The truth is rising and it is ugly. No amount of Obama bamboozlement, nor Big Media complicity will o’erwhelm the hour of reckoning, which is fast approaching.
Obama and Obamanomics must be opposed at every turn and with every resource.