So who is going to eventually pay for this accelerating debt, temporarily held by the Chinese and others? As the national debt’s percentage of GDP moves from about 40 percent to perhaps 70 percent, there will not be enough wealthy people left to bleed. Once the economy recovers, broad tax increases will be unavoidable. Or Obama’s “once-in-a-generation chance” will actually involve the imposition of massive burdens on the next generation.
While hardly irrelevant, the question of “paying off the debt” is not the truly urgent issue. If one assumes, foolhardily or otherwise, that the United States Government is what accountants call a “going concern,” then all that Treasury debt can be refinanced by new borrowing as it comes due. Businesses do that all the time.
The truly urgent issue is the interest on that debt. Now at almost half a trillion dollars every year and doomed to rise stratospherically as Washington commits to trillion-dollar deficits as far as the eye can see and the spreadsheet can add new columns.
Unlike, say, the Social Security “trust fund,” the interest on the federal debt is not some empty accounting gimmick in a binder in a file cabinet in West Virginia. That is real cash money that must be paid, on time and in full, to whoever happens to own Treasury debt.
And who owns all that debt and collects all that cash interest? Maybe the Chinese and other foreigners. Maybe rich Americans. But this much is certain: Not the poor, and for the most part not even the middle class that Obama & Co. are so eager to buy off. They just get to pay the taxes.
That is what now passes as “enlightened” post-laissez-faire progressive macroeconomic policy.
–On Budget Deficit Obliviousness (Or: “Trillions All the Way Down”)
–CRS Recommendation: The National Debt
–CRS Recommendation: Foreign Holdings of Public Debt
–Government Bringing Back 30-Year Bond
–Defining “Balanced Budget” Down