It’s Not Free.
Today I want to address an issue that we have mentioned many times but one so few seem to understand – debt.
As a nation we continue spending beyond our means, as if there is no bill, no consequences and no day of reckoning.
To counter that, let me share some information that for some reason our leaders and others don’t pay attention to.
Some of you may recall when we were borrowing and spending the past few years the word was it costs us nothing because interest rates are near zero.
What the media or others didn’t ask was what happens when the rates rise?
Well, the time is here. Let’s start with this.
The total national debt was over $28 trillion in 2021. Congress raised the debt limit to $28.4 trillion on Aug. 1, 2021 to accommodate more spending, then it raised it again by another $2.5 trillion on Dec. 16, 2021.
It is going to go up again soon.
It’s free money right? Well, the interest alone on the public debt for fiscal year 2021 is estimated to be $413 billion, according to the Congressional Budget Office.
That is $413 billion dollars of your taxes to pay the interest on the debt.
Now President Biden released this chart on what he expects the debt and interest to be in his budget.
Take note of the interest rate on the 10 year treasury and per cent of budget interest will be.
|Fiscal Year||Interest on the Debt (in billions)||Interest Rate on 10-Year Treasury||Public Debt (in billions)||Percent of Budget|
Now, I will tell you the interest rate on 10 year treasury notes yesterday was over 3% (not the 1.4% their budget estimated) and the Fed has just begun raising rates. At 2.8% in 2031 the administration estimated that interest would be 11% of the budget.
What this means is this.
As we continue borrowing and there is no plan to balance any budget, the amount of every dollar you pay to support programs will be cut by the interest payment.
The estimate above of 11% is so far off that 20% is not out of the realm. That’s .20 cents of every tax dollar doing nothing but paying interest on what was borrowed earlier! You know all that free money.
You see the problem.
Our taxes, the costs to our kids and grandkids is just going to get to the point that it cannot be managed.
We need leaders to not only understand this, but explain it to the American people. It’s easy to buy votes with free college, but people need to understand the whole picture. They will make the right decision.
Here’a a link to a deeper dive story if you want to read it.