As odd as it sounds, the national debt can be described as a bit of a credit card like debt. As with credit cards, the real danger is the interest you end up paying over the years. With the national debt as it is now constructed, the interest payments we make each year are a crime.
As I write this, the current reported national debt is just over $14.1 trillion dollars. The real number is much higher when liabilities such as Social Security and Medicare are figured in, but let’s just stick with the $14.1 trillion dollar figure.
What is the interest rate paid on this debt? The rate is 2.365 percent. This figure is low for a number of reasons. First, the Federal Reserve Bank is buying treasuries in an effort to flood the market with cheap money to, allegedly, spark the economy. The fact it keeps rates low, of course, doesn’t hurt. Second, the economic mess in Europe has resulted in people still looking to United States treasury notes as a safe haven.
So, what does this mean in hard figures? It means that we will have paid just over $400 billion in interest payments on our debt in 2010. The figure should go up to $450 billion or so in 2011. These payments represent the fourth biggest outlay we have as a country. This is more than we pay for education. The three outlays we make that are higher than the interest rates on the national debt are for the military, Social Security and Medicare. That’s it.
The problem, of course, is the national debt continues to rise. We are looking at adding a staggering $1.5 trillion to it in 2011. Lest you think this is President Obama bashing, it really isn’t. Republican administrations have been just as bad. In fact, there really is no difference between the two parties on this issue. They spend, spend and spend until we end up where we are today.
When considering the interest payments on the debt, it helps to think about what we could spend the money on. Consider the infrastructure of our country has been given a D- rating by our own engineers. What kind of improvements and upgrades could be made if there was money available…say, $400 billion a year?
It’s food for thought.
Mark P. Warner writes about the national debt and other economic issues for CurrentUSANationalDebt.com