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Tuesday, September 11, 2007
Debt on Arrival
The country's single most sobering fiscal milestone -- or millstone -- may be when the national debt reaches another trillion dollars. During the United States' first 225 years in existence, such an occasion has transpired five times -- when Bill Clinton left office, the national debt was $5.95 trillion.
During the presidency of George W. Bush, it has occurred four times. The fifth time is a grim inevitability sometime this fall, with the Senate prepared to increase the statutory debt limit to nearly $10 trillion, a new all-time record, in the next few weeks.
The Senate Finance Committee is due to mark up legislation to do just that tomorrow. The new limit, $9.815 trillion, was tacitly approved in May by the House, where a rule allows such legislation to be passed automatically with the adoption of the budget resolution.
What happens if the debt limit isn't raised? The idea that the U.S. Government would default on its debt borders on the unthinkable. The catastrophic results would include bond market chaos, followed by soaring interest rates, a rush out of U.S. and probably global stock markets, a run on banks, and flashbacks of the 1930s.
Better not to think about.
One of the nastiest features of the national debt is how expensive it is. During the Bush years, the interest expense of the debt has climbed to nearly $400 billion a year -- money the government is obligated to pay the borrowers who finance it. Put it this way: without the national debt, we could almost double spending on every single domestic discretionary program. Or we could be conducting three additional Iraq-sized wars this year.
Even better not to think about.
Posted by Dana Chasin
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