With each ticking second, the United States marches inexorably closer to reaching the end of its legal ability to borrow more money. The cash spigot will shut off when the federal debt hits $14.294 trillion, officially on August 2 according to the Treasury Department.
However, that deadline is just another part of the charade created by the media and the president. Here's what the politicians don't want you to know: the country actually bumped up against the legal debt ceiling on May 16. For the most part, the media has ignored that fact to shield the president.
In spite of the legislative mandated ceiling, the government (with the full knowledge of Congress) has continued to incur more debt because Treasury Secretary Tim Geithner has been clearing headroom by suspending investments in the retirement fund for federal employees. Those "investments" were being made with borrowed money.
In the ultimate shell game, Treasury technically can claim it has not exceeded the limit by sticking government IOU's in the federal retirement fund. It doesn't change the fact that the government has rung up more debt, but the money won't be "borrowed" until the ceiling gets raised.
As a result of this sham, the country's outstanding debt now rests at a staggering $14,343,033,186,678.55. That figure rises every hour, every minute, every second of every day. In the time it has taken you to read to this point, another $2.8 million has been added to the federal debt.
While Obama attempts to broker a deal to increase borrowing and save his failing presidency, the nation watches in mostly stunned disbelief as he continues to sell the idea that the collapse of the United States is imminent if the debt ceiling remains in place. If only the country can borrow a few more trillion dollars, the United States will be spared from financial ruin, the president contends.
To parody the president's favorite phrase, let's be clear about this: the United States has a debt problem. Borrowing even more money does nothing to address the issue. In fact, borrowing deepens the financial hole by raising interest payments on debt which worsens the federal deficit.
No politician dares mention the relentless raid on the nation's treasury to finance the current mountain of debt. In June alone, your government wrote a check for $110.5 billion just to pay the interest on the trillions of dollars it owes to investors. The country still owes every penny of the principal amount of $13,343,033,186,678.55. A sizable portion of that debt--$4.3 trillion--is held by foreign governments.
Last year the federal government paid $413.9 billion in interest alone to satisfy its financial obligations. In the first nine months of the current government fiscal year (October, 2010-June, 2011), the United States shelled out $385.8 billion just to meet the interest due to lenders. At this rate, the government will easily surpass the record of $451 billion paid in interest in fiscal year 2008.
Interest on debt is now the federal budget's fifth largest item. Debt costs rank only behind entitlements and defense and domestic security in the budget. No doubt interest payments will consume a larger share of the budget each fiscal year as the current historically low borrowing costs inevitably begin to escalate. The Federal Reserve can only suppress interest rates for so long. Even a quarter-percent increase in borrowing costs will have a grave impact on interest payments.
The debate over the debt ceiling has muted the alarms bells created by the ballooning interest on borrowed money. With government debt climbing at an annual rate of 8.5 percent since 2009, the nation has arrived at a critical tipping point, where interest payments are a threat to cratering the economy.
No Democrat or Republican has yet stepped up to the issue. Everyone in Washington, from the President on down, wants you to believe that borrowing more money ends the financial crisis and provides the country breathing room to address runaway budget deficits.
However, the interest payments on debt have helped create the very deficits that has everyone concerned. Unless the nation quits its borrowing habit, default on the national debt will be no less an issue than if the ceiling remains in place.
As the president often says, it is time for the Congress to act like adults. The only way out of this sticky financial mess is for the adults in the House and Senate to just say "HELL NO" to increasing the debt.
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