using round numbers, at $20 trillion in debt, times an average borrowing rate of 4% (someone correct me if that’s a bad number), would equal $800 billion in year in government spending, just to pay interest on the accumulated debt from previous presidents.
So, again round numbers, correct me if these don’t make sense, then about $800 billion of the $1 trillion they are concerned about, is needed to pay interest on previous financial obligations.
Why was nothing said by anyone, when Obama presided over lackluster economic growth, and an increase in the debt from about $9 trillion to about $20 trillion?
The debt under Obama increased more than it did under all previous presidents combined.
A little context and history is appreciated, and should be included, if these media folks ever do any fact checking or context.
Yep. And before that, Bush did the same thing. Trump will probably come close as well. That is the current path of all presidents. There is no concern for debt. Just like many of the comments leaving out that the GOP had control of spending, during several years of Obama, and the debt still went up. That's the r and d tag team that's destroying America.
>>using round numbers, at $20 trillion in debt, times an average borrowing rate of 4% (someone correct me if that’s a bad number), would equal $800 billion in year in government spending, just to pay interest on the accumulated debt from previous presidents.<<
It’s a bad number. The public debt is around $15 trillion (the rest is in intra-government accounts like Social Security) and the interest on that in FY2017 was around $270 billion. That implies an average interest rate on the outstanding debt of around only 1.8%, and that’s a huge problem for the budget since interest rates have nowhere to go but up from there. The reason it’s so low is that short rates have been below 1% for years and the Treasury issued a lot of short debt, plus longer debt they issued was also only at 2 to 2.5% or so for years.
Well, the chickens are coming home to roost now. If they issue a trillion in new debt this fiscal year, they’ll also have to roll over about $4 trillion of maturing debt, most of which was issued at under 1% as Treasury Bills.
So, say rates rise to an average of 2.8% this fiscal year. That 1% will cost 1% of the $5 trillion in debt issued, or $50 billion. Within a couple of years, if rates rise another percent to an average of 3.8%, they’ll be issuing about the same amount but that issuance will add another $100 bn to the interest load.
All of this is manageable if they finally get the budget under control and if that’s the extent of the interest rate rise. But if rates go to, say, 6% on average, then in just a few years we could have upwards of $10 trillion in debt costing 6% per year or $600 bn per year in interest, plus the interest on the debt that hadn’t been rolled over of another $100 to $200 bn, and we start reaching your $800 bn per year in interest.
And, of course, if inflation gets serious and we go to 10% interest rates again, well, we’d better hope that the Treasury has issued a lot of long term debt before that happened, or we’ll be looking at well over a trillion dollars in annual interest costs. As it is, we’ll eventually get to that level anyway if we don’t get spending under control at some point.