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I see we have another one of Mr. Longhofer’s “don’t worry, be happy” letters telling us the need for austerity is based on fuzzy math and we can spend with wild abandon and the economy will thrive. Mr. Longhofer’s position is that austerity is manufactured hysteria. Well let’s look at some basic math and the readers can decide for themselves whether it’s fuzzy or not.
Interest on our debt last fiscal year was $227,870,358,779.45. In fiscal 2009 the interest was $383,071,060,815.42. These numbers come from the Treasury Direct site of the federal government. The national debt was around $10.5 trillion in 2009 and around $16.7 trillion now. One might wonder how we could pay so much less in interest on today’s much larger debt. Simple, the Fed reduced interest rates to almost zero. For you and me this would be like having a 50 percent higher balance on your Mastercard but having a lower minimum payment. Basically this means that we have been able to heavily indebt our grandchildren without any current pain to us. Basically everybody on either side of the aisle agrees that we are rapidly approaching a $20 trillion dollar debt.
Historically interest rates have averaged around 4.2 percent. Even three percent would mean a $600 billion interest payment on $20 trillion. That’s almost $400 billion more than we are paying now. The left just had a panic attack on an $82 billion dollar sequester. What kind of cuts do you think a several hundred billion dollar hit would force? Remember all those nice federal programs that liberals along with others support? Some of them I’ll grant are very important. Well that big pile of cash paid in interest is money that can’t be used to support those programs. So then you have to either print a boat load of money (the feds are printing almost $3 billion a day now) or raise taxes to very high levels to pay for those programs.
So Mr. Longhofer is right, you don’t need to voluntarily do austerity now, but if you don’t, it will be done by force on your posterity.