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CNN OpEd - Washington is quickly hurtling toward debt crisis

While this Op/Ed is focused on US debt, the challenge is global as seen by the moves today by the Bank of Japan.

From the Op/Ed Attached:

"Between 1990 and 2021, the average interest rate that the federal government paid on its debt gradually declined from 8.4% to 1.7% due to a dovish Federal Reserve, sluggish economy and rising global savings. This allowed Washington politicians to hike the debt held by the public from $5 trillion to $25 trillion, with annual interest costs remaining near $350 billion over that period (all adjusted for inflation), according to my calculations of data from the Office of Management and Budget. As long as interest rates kept falling, Congress could keep adding debt without interest costs rising — and those stable interest costs became increasingly affordable as the economy and tax revenues rose. In response, over the past several years, progressive politicians and leaders began treating falling interest rates as an immutable law of science, proposing trillions in new spending as a free lunch to be put on a near-zero-interest national credit card.

But the low interest rate case for a debt-financed spending spree never made sense, for two reasons. First, because like a short-sighted home buyer, Washington never locked in those low interest rates. The average maturity of the federal debt — the length of time before the government must repay the bond holders and then replace them with new bonds at the prevailing interest rate — remains at just 76 months, and nearly all of it must be replaced with new bonds within a decade. So any future interest rate rise would hit nearly the entire national debt.

The second reason is that — even with no additional spending expansions — Washington is already scheduled to borrow $119 trillion over the next three decades, pushing the debt toward 200% of the economy. Even at the low interest rates projected by the Congressional Budget Office (CBO), a debt this massive would leave interest payments as the largest federal expenditure, consuming more than one-third of all federal taxes. Any additional borrowing would just pour gasoline on the fire."

Link: https://www.cnn.com/2023/09/29/opinions/federal-debt-interest-rates-riedl/index.html

Posted: 10/02/2023 at 4:10PM


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Current Thread:
  He lost credibility in the first sentence -- bufffantheman 10/03/2023 10:32AM
  Failed Fiscal and Monetary Policy since 2009. ** -- schrodingers cat 10/02/2023 9:14PM
  Since 1980 ** -- JeffCoBuff 10/03/2023 02:13AM
  The old fictional laughable Laffer curve, ** -- cswilliam 10/03/2023 01:26AM
  Then we could give even more money to Ukraine!! ** -- Buffaluff 10/02/2023 10:47PM
  Yeah, that would probably be part of it… ** -- Ralphie Bruber 10/02/2023 11:12PM

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