Obamanomics –The Road To Insolvency
The road to insolvency is paved with red ink. How can the United States become insolvent? Easy, just add the Obamanomics deficits, as laid out in the President’s ten-year plan, to the existing $11 trillion national debt and it will not be long before the US is unable to meet its financial obligations. Presently, debt held by the Social Security Trust Fund and other governmental agencies is $4.4 trillion, plus the remainder of the debt (owed to citizens or “foreign” owners) is $6.6 trillion. Approximately 50% of US debt is owed to foreigners, up from 31% in 2000, and this debt will undoubtedly continue to climb. If China and other foreign creditors lose their appetite for US debt, the result will be catastrophic for the dollar, US interest payments and the economy.
According to the Treasury, the average interest paid on this $11 trillion debt is 3.7%. Despite this low rate, the Treasury estimates that it will pay out $450 billion in interest on Treasury debt securities in fiscal 2009. To put this is perspective, the Defense Department budget is $657 billion. This low interest rate will not last forever, particularly in an environment where the United States is incurring trillion dollar annual deficits.
Even if the national debt were not rising, it is likely that US interest payments would double to $900 billion annually as interest rates return to their historical average of 6-7%. Unfortunately, deficits will grow at an astronomical rate if we use the Obamanomics budget figures as a guideline. The national debt will exceed $15.5 trillion in fiscal 2012, and annual interest payments will rise to over a trillion dollars. As foreigners become disenchanted with US Treasuries and interest rates rise, it is a virtual certainty that annual interest payments will approach $1.5 trillion.
Perhaps the fiscal 2009 deficit of $1.75 trillion should be viewed as an anomaly since it’s the direct result of the $700 billion Bush TARP plan and the $800 billion Obama Stimulus Plan, both implemented to ameliorate the effects of the financial crisis and recession. But how can we justify an average deficit of $700 billion annually from 2010 to 20019, which, according to the Obama budget, will be boom times? GDP will likely rise to an eye-popping $23 trillion in 2019 based on the Obama budget. However, expenses will grow to nearly $5.2 trillion and “taxing the rich” will not pay for it.
Obama Administration Budget (In billions of dollars)
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |
| GDP | $14,240 | $14,729 | $15,500 | $16,470 | $17,498 | $18,836 | $19,205 | $20,952 | $20,952 | $21,884 | $22,858 |
| Outlays | $3,938 | $3,552 | $3,625 | $3,662 | $3,856 | $4,069 | $4,258 | $4,493 | $4,678 | $4,868 | $5,158 |
| Deficit | $1,752 | $1,171 | $912 | $581 | $533 | $570 | $583 | $637 | $636 | $634 | $712 |
Is this “A New Era of Responsibility”? If we take the administration’s rosy recovery scenario at face value, fiscal 2010 GDP will grow by a very healthy 3.4% and federal outlays will be a breathtaking $3.6 trillion, or 24.1% of the projected $14.7 trillion GDP. Since federal receipts will only be $2.4 trillion, a deficit of $1.2 trillion will be incurred in fiscal 2010. This is only the beginning of a recurrent pattern: rosy growth projections for GDP, increased spending and unprecedented deficits as far as the eye can see. Deficits dip from 2012 to 2015 and then continue merrily higher for the rest of the decade without respite. In fact, the projected deficit in the Obama Budget is $7.0 trillion for the decade 2010 to 2019. That’s the good news!
The Congressional Budget Office (CBO) has concluded that, if the Obama budget were approved, the federal government would actually run even larger deficits averaging nearly $1 trillion a year over the next decade. The cumulative deficit from 2010-19 would be $9.3 trillion, according to the report - $2.3 trillion more than the administration’s forecast. The main reason for the difference in budget estimates is a difference in economic growth, with congressional views of long-term growth less optimistic than those of the White House
During the Bush years, the national budget rose from $1.9 trillion in 2001 to $3.0 trillion in 2008, and the country went from enjoying a surplus of $128 billion in 2001 to suffering a deficit of $459 billion in 2008. Dramatic expansion of the deficit under the Obamanomics regime could mean that by 2012 service on the national debt could approach the levels of the entire 2001 United States budget. What a difference 12 years of reckless fiscal policy can make!
Obamanomics represents change with unconscionable deficits leading us to the brink of national insolvency. And to what end - to remake the United States into a mirror image of a European social democracy?
In a sober moment one might want to reflect on why so many immigrants have come to this land of opportunity. Has our system become so rotten that we are willing to risk spending our way into insolvency to reform it? I think democratic evolution is needed not a fiscally irresponsible social democratic revolution.
Absolutely agree. What is this man thinking? He’s going to force the Fed to monetize debt. What happens when China wakes up one day and pulls the debt card on us? We risk a situation that may result in hyperinflation and the collapse of the dollar. It’s frightening to think that so few people recognize the almost-impossible-to-overstate meaning of these numbers. Insurmountable debt for an entire nation.
March 30th, 2009 at 7:49 pm
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April 5th, 2009 at 12:58 pm
You’re right, the current finical plan is’nt bullet proof or candy coated. But its hard to make gold out of horse shit. CAPATILISM IS BROKEN. We created a global market and now we have to let go of righ wing idealism and compete in it. Conservative American solutions are laughable. At best.
April 6th, 2009 at 5:08 pm
Capitalism is’nt the problem here. Lets show the whole world the video of the liberals saying nothing was wrong with our housing. Pres. Bush tried aprox. 12 times to get fannie and freddie regulated because he knew what was comming. Go to barney franks fiasco and see the truth. The same people who caused this are in charge of fixing it. Pres.Bush could’nt get banks regulated because there was enough dems. to block the votes. As god is my witness, this is the truth. Start researching what really happened.
April 16th, 2009 at 3:42 pm
Andy - please learn how to spell. Your anger for things you don’t understand comes out in your comment - loud & clear. It’s “financial” & “capitalism”…by the way - what is “righ wing idealism”? So you’re saying we must become socialists to be viable in the global market? If so, that’s foolishness. Your fear has backed you into a statist corner - I sense your cowardice.
May 1st, 2009 at 10:11 am
Correction: the budget surplus for 2001 and the deficit for 2008 were both in the billions, not millions. I suggest that you look at deficit projections made in 2001 where it was estimated that the national debt would be paid off by 2010. I think that Obama’s estimates presented here is far to rosy.
The relative decline of manufacturing hurts us since the real production sectors (including mining and farming) ultimately support the service sectors. Thus the rail GDP is likely to drop in the future and not rise as shown in the table.
May 8th, 2009 at 10:09 pm
@David,
Thank you, I corrected my typo. I guess I am becoming dizzy and dyslexic with millions, billions and trillions. I agree with your assessment that GDP will not grow the 60% over the next ten years as projected in the Obama budget.
There is no replacement for manufacturing or mining in the Obama Economic Plan, if anything there is a distain for these sectors and this will continue to be a drag on GDP. Green jobs are nice but too small to make a significant impact. The administration does not seem to recognize the scope of our economy and the natural growth of our labor pool - we must create nearly 150,000 new jobs every month just to prevent the unemployment rate from rising.
May 9th, 2009 at 3:33 pm