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Interest – The Biggest US Expenditure?

Buried in this lengthy and generally misleading article about the stimulus package from the Associated Press we find a little noted detail:

How government stimulus plan will affect you

Tue Feb 17

… Forecasters expect the 2009 deficit — for the budget year that began last Oct 1 — to hit $1.6 trillion including new stimulus and bank-bailout spending. That’s about three times last year’s shortfall.

The torrents of red ink are being fed by rising federal spending and falling tax revenues from hard-hit businesses and individuals.

The national debt — the sum of all annual budget deficits — stands at $10.7 trillion. Or about $36,000 for every man, woman and child in the U.S.

Interest payments alone on the national debt will near $500 billion this year. It’s already the fourth-largest federal expenditure, after Medicare-Medicaid, Social Security and defense

Last year, before we began all the bailouts and stimulus the interest on the debt was the fourth largest government expenditure.

If the debt is going to triple in size, won’t the interest triple as well? Will the interest on the debt be $1.5 trillion dollars?

Even if it doesn’t treble won’t it still become the largest federal expenditure?

Granted the Medicaid/Medicare/SCHIP and other “safety net” programs will grow, but even they won’t be trebled.

If interest on the debt was 9% in 2007, will it be 27% of the federal budget next year?

If so, will it not be the largest federal expenditure?

This article was posted by Steve on Wednesday, February 18th, 2009. Comments are currently closed.

12 Responses to “Interest – The Biggest US Expenditure?”

  1. beautyofreason says:

    The near equivalent of a bailout every year – on interest only. Scary.

  2. Confucius says:

    This can’t be good.

    In the private world, financing day-to-day operations usually means insolvency is in the cards.

  3. proreason says:

    “If interest on the debt was 9% in 2007, will it be 27% of the federal budget next year?”

    The interest is paid on the accumulation of many years’ debt, so it won’t triple becasue of one more trillion. The whole debt is in the range of 10 trillion. In addition, the interest on most of the 10 trillion is fixed because the bonds have already been sold. And new debt is being financed at very low rates.

    But, since interest rates on Treasury notes are so low now, they WILL increase substantially in the next few years, and the interest on new debt and some debt that has to be refinanced will explode.

    Because so much is already financed, it’s hard to see an immediate explosion to 27%…….but over time it will get there.

  4. Rusty Shackleford says:

    If Tommy has three apples and Sarah has two apples, How many apples must Nancy take to have ALL the apples?

    Look, Look. Dick and Jane have money. See the money. Money, money, money. See Nancy steal the money and throw it down the drain. Dick and Jane had money but now they have none. It is gone. Gone, gone, gone. Do you have any money?

  5. MinnesotaRush says:

    And just how often thru these next upcoming years are we going to repeat, and repeat, and repeat this out-of-control spending which will lead to more interest, and more interest, and more interest?!?!?! I’m seein’ a trend from this obama dude!

  6. bousquem says:

    I have to say that it seems to me that alot of medicaid patients who come into the pharmacy I work at seem to get any medication they want for dirt cheap. Alot of plans won’t even think of covering Nexium anymore but medicaid seems to give everything away for free. Under the idiots in washington I can just see the money I’ll be making in a year and half when I graduate pharmacy school, getting tossed down the drain. I can just see all every little appropriation the democrats want being shoved through in future “emergency” spending/stimulus/bailout bills that I’ll be forever paying for and probably my children also.

    I don’t seem to get the idea that if you just toss money at problems and they will magically go away, especially money we don’t have and just digging ourselves deeper into a hole I doubt we’ll ever get out of.

    • proreason says:

      Talk to you classmates about it bosquem…..or at least the ones you think won’t assault you.

      You are a unique young person to have the wisdom you just stated.

  7. Colonel1961 says:

    I think you’re confusing deficit with national debt. Yes, the deficit and the national debt will increase (by about 20%) and will then consume (ceteris paribus) 12% of our outlays, but not triple or 27%…

  8. heykev says:

    At least while our grandchildren (I have a 2 year old) will be paying off the debt, Billionaire Paul Allen a Microsoft cofounder, will be able to afford a new huge shiny boat (to go along with the two he already owns) because of the Stimulus will save him MILLIONS!


    • proreason says:

      It’s actually worse than you think heykev.

      The idle rich socialists who just bought the presidency lost little if anything in the economic manipulation that cost the rest of the country about 20 trillion.

      How do I know this?

      Because they are rich enough that it makes no sense to take any risks whatsoever.
      – they only have pocket change in the stock market. It can go down, you know, so they don’t do it.
      – Their liquid funds are in U.S. government or municipal bonds. Money in Treasuries is largely hidden offshore (see the article recently posted about UBS). Onshore money is in tax-free municpals.
      – the rest of their fortunes is in real estate, which ultimately is very safe and inflation proof. In addition, real estate taxes are 1% or less for the idle rich, who have rigged the tax systems in their favor.
      – contrary to popular belief, they have only pocket change in “businesses”. Business can lose money, and they don’t need that.
      – and since they don’t work, they can’t be laid off

      You may say, you’re nuts PR, but I know this because once a family reaches a threshold of wealth, there is no reason to want more. After all, one can only have so many yachts. But the threshold of wealth is very high. It’s even possible to predict it, and take my word…..you won’t get there. The threshhold is the amount that can generate the income you want from 1% of your liquid assets. Let’s say you are content with 1 million spending money per year. You then need $100 million in income-producing assets to maintain it forever. Since you as a parasitic idle rich person will have about 50% of your wealth in real estate, it means that the threshold to be truly wealthy is about $200 million.

      The reason for the 1% is that you, as a parasitc idle rich person, need your little nest egg to keep pace with inflation. Inflation runs about 3% per year. Municiple bonds pay about 4% per year. The difference is 1% per year. You can only draw out 1% and while protecting your unearned fortune from inflation and still minimize the risk.

      This is also the reason that sabe average people don’t invest in municipal bonds. They only barely keep pace with inflation. You cannot amass any wealth for your heirs or retirement.

      So you see, municipal bonds are really just a tax avoidance hoax for the parasitic idle rich. The Moron will never take that tax dodge away, becasue the parasitic idle rich are his puppet masters.

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