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  • We're Already Paying for Obama's Debt Tsunami

    The New York Times reports today:

    As the Obama administration racks up an unprecedented spending bill for bank bailouts, Detroit rescues, health care overhauls and stimulus plans, the bond market is starting to push up the cost of trillions of dollars in borrowing for the government.

    Last week, the yield on 10-year Treasury notes rose to its highest level since November, briefly touching 3.17 percent, a sign that investors are demanding larger returns on the masses of United States debt being issued to finance an economic recovery.

    Already, in the first six months of this fiscal year, the federal deficit is running at $956.8 billion, or nearly one seventh of gross domestic product — levels not seen since World War II … Debt held by the public is projected by the Congressional Budget Office to rise from 41 percent of gross domestic product in 2008 to 51 percent in 2009 and to a peak of around 54 percent in 2011

    The trouble is that government borrowing risks crowding out private investment, driving up interest rates and potentially slowing a recovery still trying to take hold. That is why the Federal Reserve announced an extraordinary policy this year to buy back existing long-term debt — $300 billion over six months — to drive down yields. The strategy worked for a while, but now the impact of that decision appears to be wearing off as long-term interest rates tick up again.

    Then there is the concern that the interest the government must pay on its debt obligations may become unsustainable or weigh on future generations. The Congressional Budget Office expects interest payments to more than quadruple in the next decade as Washington borrows and spends, to $806 billion by 2019 from $172 billion next year.

    One worry, however, is that there are fewer eager lenders to buy all that American debt. Most of the world is in recession, and other nations have rising borrowing needs as well. As other nations’ surpluses turn to deficits, America will face competition in global financial markets for its borrowing needs.

    Heritage fellow J.D. Foster explored the ramifications of the Global Government Debt Bubble earlier this year:

    Expected federal borrowing for 2009 and 2010 will be far from modest, and the consequences will be significant for interest rates–and potentially crippling for the economy. Using just the consensus estimates, the projected increase in the debt-to-GDP ratio for 2009 alone will raise interest rates by between 0.39 and 0.65 percentage points. In today’s terms, the average mortgage rate at the end of January was about 5.33 percent on a conforming loan mortgage. At the end of 2009, if nothing else occurs, this rate would be between 5.75 and 6 percent.

    Using the consensus estimates, by the end of 2010 interest rates will be up another 0.3 to 0.5 percentage points, for a total increase due to the government debt bubble of 0.7 and 1.1 percentage points. That would mean that today’s mortgage rate of 5.33 percent would be between 6 percent and 6.4 percent. Such increases in interest rates would significantly weaken the economy further and delay for many months any hope of significant recovery.

    Posted in Ongoing Priorities [slideshow_deploy]

    11 Responses to We're Already Paying for Obama's Debt Tsunami

    1. MAS1916 - Denver, CO says:

      This will leave the Leader with no option but to print the money He needs. The resulting inflation will be a cruel tax INCREASE on the middle class!

      Obama continually speaks of tax cuts for middle class folks, but none of the mainstream media questions Him on inflation. Inflation is a tax because it is the direct result of government policy. So the middle class can either have a tax increase via the IRS or a tax increase via inflation.

      Obama is relying on media adoration and worship to shield Him from criticism. However, patience is already wearing thin. Many are now regretting their votes last November. Conservatives need to act now to intervene for our liberal friends.

      For a few ideas, and perhaps a bit of a laugh on how to do this, hit this for a 12-step plan recovery plan for Obama supporters:
      http://firstconservative.com/blog/top-ten/12-step

    2. Doug Miller, Atlanta says:

      So, what would you do if you were president? Interest rates are at historic low, anything under 7% is still excellent. The statement that interest rates just under 6.5 would delay the recovery is moot, if there isn't a recovery to begin with.

      Doug in Atlanta

    3. Ken St Louis says:

      Its kind of sad in a way, Obama keeps talking about Chrysler merging with Fiat. The word fiat in our dictionary means paper money that isn't backed by anything except the rinting press!!! When governments resort to fiat $ meaning worthless paper $ thats not backed by anything but "the full faith & credit of our government" it usually means that inflation/depression is on the horizon. Also, the day is comin when other countries won't want our worthless paper $

    4. SMB, Ohio says:

      I don't see any hope for recovery. The presidency has become nothing more than a buy and sell to the American people. I was amazed when Bush proposed the first bailout and it was passed. I was less so when the second bailout and then the stimulus package was passed. Recognize that the language and the economic poking does nothing more than to encourage the people and their politicians to let go of liberties and freedoms for the illusion of safety. The fear evoking language and demonification of big business in favor of labor unions and entitlement programs does nothing more than start the shift from capitalism to fascism and socialism. Since this is the case, the economic recovery will be illusory and will -unless there is a change in policy- be non-existent. The recovery will come from people being tired out by the government taking what is not theirs to save those who have the 'greatest need'. The recovery will also come from the congress recognizing that their position is tenuous and is directly related to their acquiesence to the people and not the President.

    5. Keith Jones, AZ, kei says:

      One word: DUH!

      This isn't rocket science people. A sixth grader with a moderate IQ could tell you this budget and this level of spending are unsustainable. Period.

      http://www.keithjonesblog.com

    6. Dennis A. Social Cir says:

      I remember the carter years and after. Mortgage rate were at an all time high, 15-16%. How well is this going to go over again. Those that do not think inflation is on the horizion are asleep at the wheel. This will stop the country in its tracks. President Regan is all that saved this country from the carter ruin.

    7. Larry in Texas says:

      It's amazing how some folks suffer the tunnel vision focused on their "own market" concerns. The fact that MY government now owns controlling shares of a money vacuum IS THE PROBLEM! One mortgage point or another, either way or the other aint sinkin' the ship. The fact that these arrogant Liberals think they can now spend MY money by Chicago Rule will be their own downfall and you can take that to the bank. The companies who were the first to hold their palms out and up are the same companies who were sellin' junk or ideas that nobody wanted in the first place, and nothin' Obama does is going to change that image!! Nothing! What these puppets of Nancy "Profit Sharing" Pelosi can't seem to get their heads around is that there is no way that I"ll ever buy any of "THEIR" products, especially after the arrogance they have displayed!! One way or the other the UNIONS will pay for their decades of greed, corruption,deception and strong arming their voting members. Sadly, some hard working Americans will suffer on behalf of the UNIONS and the "Business as USUAL" payoffs they muster from dues paid! OH yea, they'll pay!! They may flop around and bleed all over the rest of us, but they will finally succumb to their self inflicted wounds! Pray for the day America.

    8. Larry in Texas says:

      On another note of similar tone, the Obamanation will express their desire for us, as SHARE HOLDERS in these bailout drenched and bandaged up industries, to help "OUR" companies out while we enjoy the ownership of our own destiny!!Sounds a lot like what GM/Chevrolet ALWAYS told their employees, look where they are now. I say now is the time to boycott ANY companies that the Liberal Socialist Elite conjure up support for and FORCE them to sink or swim on their own merits. Enough of the Capitolism on the way up and Socialism on the way down. Pick a side and fight like losing will kill you!! It's already costing my future Grandbabies and we're only a hundred days into this fiasco!

    9. DON IN ALASKA says:

      CUT UP THE CEDIT CARDS , AND PAY THE BILLS!!! THAT IS THE ONLY WAY TO RECOVERY. WHERE IS NEWT AND THE CONTRACT WITH AMERICA WHEN WE NEED HIM ? THIS IS CARTER ON STEROIDS, WE HAVE BEEN HERE BEFORE . WE AS A COUNTRY HAVE LOST OUR WAY , I PRAY THAT SOMEHOW WE CAN FIND OUR WAY BACK . GOD HELP US ALL .

    10. Marshall Hill MI. says:

      2010 can spell the end of the LIBS,and turn back

      the rest of the PORK BILLS!

    11. Russ in Cleveland TN says:

      With approximately 62% of the American voting population consisting of minorities, radical left wing idelogues, and welfare recepients it is clearly a problem for conservative government to be reestablished until massive economic negative pressures are exerted on the masses of the voters. Inflation, high interest rates, high energy costs, and high gasolene prices may very well puncture the Obama Popularism Balloon.

      The problem is how long can the country endure the financial mismanagement as this Administration pursues its goals thru the INSANITY OF MASSIVE DEBT THRUST ON THE SHOULDERS OF OUR CHILDREN AND GRAND CHILDREN. It is true we will begin to see an immediate escalation of inflation, interest costs and energy prices even if the CAP AND TRADE disaster does not pass.

      The only thing that can be done now is to prepare for the bursting of this BALLOON and hope we have some kind of a leader who can take America back to a path of SANITY.

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