| To: bart13 who wrote (109631) | 2/17/2011 1:34:06 PM |
| From: mindmeld | 2 Recommendations Read Replies (1) | Respond to of 109991 |
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That chart is the wrong way to look at things. It's not how much debt service, or interest, you are paying divided by income, but how the future trajectory of that interest. Do the math yourself. Right now, we have federal spending levels at $3.6 trillion dollars over income of $2 trillion, for a deficit of $1.6 trillion. If this were to continue for the next 10 years, as seems likely, that's an additional $16 trillion of debt on top of $14 trillion today, for a total of $30 trillion. At a VERY conservative 3% interest, that's $900B in interest. If interest rates get out of control, which is extraordinarily likely, then we're looking at 5%, 8%, maybe even 10% interest. Remember the Jimmy Carter era, when you could get 1 year CDs paying 12%? I do.
What's 5% of $30 trillion? $1.5 trillion. What's 10%? $3 trillion. We're talking about the mother of all crowding out scenarios. With GDP expected to grow at 2.5% annualized over the next 10 years, we simply won't have enough tax income to pay for anything else besides interest. But don't worry. All of this will explode long before we get to the 100% crowding out scenario.
That's the perspective you should have. Don't look at the past. Look at the future. |
