Well isn’t this nice: Washington will need to roll over $2,800,000,000,000 in maturing debt this year. Just this year. That’s in addition to the $1,200,000,000,000 in new debt we’ll rack up during the same period.
If I can still remember how to add 2.8 to 1.2 and then add back all the zeros, that’s $4,000,000,000,000 we need buyers for. Good thing Uncle Ben has his great big printing press available!
Look, yesterday Paul Krugman wrote yet another one of his insufferable paeans to deficit spending. You know the drill: We never have to repay the balance, and interest rates will never be this low again! This fabulous washer and dryer set can be yours for just $25 a month! Krugman is the Sears Credit Card of political pundits.
What he didn’t mention — huh — is that interest rates can’t stay this low forever.
See, under President Bush it became fashionable to finance long-term bad spending habits with short-term bonds. Yes, that helped keep the deficit lower by reducing the interest rates we pay, and hence lowering our payments. But it also leads to the fix we’re in now, where we find ourselves having to re-fi a couple trillion dollars every year, as those three-year loans come due.
So, yes, it is cheap now. But we’re at historically-low interest rates, which must pop just as soon as the economy strengthens.
What happens then? What happens when interest rates return to something normal, like 5%?
Well, our payments balloon. Same thing that happened to a lot of very stupid Americans who tried to buy houses they couldn’t afford, on the cheap with variable-rate loans.
And when I say balloon, I mean Hindenburg. At normal interest rates, it will cost us more to service the debt each year, than we spend on national defense in peacetime. It will cost us more to service the debt than we pay out in Social Security. Or for Medicare/Medicaid.
So, yes, Mr. Genius Paul Krugman, we do in fact need to pay off the balance, because otherwise we’re looking at trillion-dollar interest payments as far the eye can see.
Suddenly, that’s a mighty expensive washer & dryer set. And with all our money going to pay for it, how will we ever afford to replace them, or even just to repair one when the needed arises?
Sears Credit pitchman Paul Krugman knows all this — he’s not stupid. But he thinks you are.