Debt Disaster

The lead article in today’s New York Times is titled, “Federal Government Faces Balloon in Debt Payments.” It describes the cost of financing the government’s debt and a pending disaster as interest rates rise and the baby boomers retire.

The article notes that the current national debt is more than $12 trillion, and the cost of servicing the debt is more than $700 billion, a rise of $500 billion from last year, equal to the combined budget for education, energy, homeland security and the wars in Iraq and Afghanistan.

The unfortunate situation ultimately comes back to the recent financial meltdown and the effort of the U.S. government to avoid total disaster by passing the stimulus program. However, the surge of spending it required, could have major ramifications as the United States now tries to move back to a more normal situation.

The article notes that the government will have major difficulties doing so due to the lack of personal wealth from consumers still mired in debt, and often unemployed now, too, as well as the demands on social security when the baby boomers retire. This is also exacerbated by an anticipated rise in interest rates that will make the continued borrowing required in servicing the debt even more expensive.

Not a cheerful thought on a Monday morning, but call me an optimist, I think the United States will muddle through somehow. If any country can, it will be this one.