IF you were looking for good news here, you might want to move on....
The Interest on the National Debt takes up about 5.9% of our current Federal Budget. JUST the interest, just at the lowest levels in the history of our Government. Talk about a complicated mathematical world- wait until the rates are increased for inflation and to cool off the economy. And yes, that will happen in time- it always has and always will, as businesses run in cycles. We have good years, followed by not so good- then it bottoms and turns, followed by another nice run- sound familiar, although distant?
The Interest is the 800 lb Gorilla in the closet... not really in the room where people can see it and fear it, but in the closet where people aren't aware of it- although it is still just as dangerous.
Our Debt is about 16 Trillion(hate tying that word and debt...) and it is climbing. The last Bi-partisan run rate I saw was President Obama's policies would take us up to 21 T minimum, whereas Senator Ryan's plan would take us to about 20 T... what's a Trillion here or there... seriously, it goes above 20 Trillion no matter who is in charge, obviously unless something dramatic is done. And that is without adding anything new, but just staying the course with current policies and outlays. WOW- over 20 Trillion in Debt... that is a HUGE number, but it isn't nearly as destructive as the rise in Interest rates will be eventually.
Take one step back and see the big picture, before I explain WHY.
The Federal budget(money used each year) is about 4.7 Trillion currently, and interest payments make up about 5.9% off that number. The BIG ticket items are Social Security 20%, Defense 18%, Medicaid 15%, Medicare 7%, Low Income Support 9%- and then the Interest payments at 5.9%- which totals 75% of the money spent (see link at bottom)... ALL the remaining money is discretionary- but fixed to a point. So there isn't a lot of wiggle room unless TOUGH CHOICES are made soon. And frankly, No One in politics wants to be THAT person- you know, the one who took things away from all of us, the one who made you pay for something you won't get, the one who changed the rules mid-way through your life... political will for the Good of us all, even out of necessity? I don't see it happening.
Now the interest.... IF we were to double the interest rate, which wouldn't be anything major given it is under 1%- we would need to shave 6% out of the budget to BREAK EVEN. If you go worse case scenario and we get back to a level pre-recession, the interest rate would eat up ALL of the discretionary 25%... so everything would go, but we wouldn't be any closer to removing the burden of total Debt on our countries' shoulders- not by one little bit. THEN it wouldn't be a choice, it would be an austerity measure to deal with a crisis that would already be on us. Remember the Midas commercial- "You can pay me now, or pay me later?"- well, that is us about now.
So after all this gloom and doom- what is the answer? I call it a Reality Check. All of us have to come to a start and uncomfortable decision that we will not keep getting everything we currently get, and we will have to may more to get less. Blame anyone you want- but truth is truth. We have a very small window to salvage this- but the clock is literally ticking.
Two options- We never get out of this "recession- slow expansion" we are currently in OR we do. Which do you hope for? That we get out, right? That we get more jobs, right? That things "go back to normal", right? Of course, who would hope otherwise. But if that happens (and it will), be careful what you wish for- unless we have made adjustments ahead of time.
It will come down to one simple question- Did we plan for the rise of Interest Rates and what that would do to our National Budget? The answer must be YES, and we aren't getting any younger... the time is now.