01.31.2011 0

No Laughing Matter

  • On: 02/18/2011 09:27:07
  • In: Fiscal Responsibility
  • By Robert Romano

    According to Barack Obama’s ten-year budget, the $14 trillion national debt will increase every single year and never be repaid.

    But don’t believe your lying eyes. When Obama delivered his budget to Congress, he boldly suggested that “[B]y the middle of this decade our annual spending will match our annual revenues. We will not be adding more to the national debt.” Everyone laughed.

    A fourth grader could easily calculate that on average the White House promises to add $1.088 trillion to the national debt every year for ten straight years. It will hit $15.459 trillion the end of this fiscal year, and then rise to $26.346 trillion by the end of FY 2021. So, what is Obama talking about?

    He was using an accounting gimmick, called the “primary deficit,” that does not count the average annual $572.6 billion of net interest owed on the public debt. Nor does it count the average $275.8 billion owed in interest on the Social Security and Medicare trust funds.

    All told, by not counting interest, the White House is attempting to avoid talking about some $848.4 billion being added to the debt every year. Neat trick.

    Of course, the only way interest payments can be avoided is if the principal balance on a debt is paid early. Otherwise, those payments are simply added to the gross debt — the total owed.

    The hilarity carried forward into the White House briefing room. There, the White House’s pretense that we are not adding to the debt was easily exposed by ABC News’ Jake Tapper in an exchange with Obama’s green, new Press Secretary, Jay Carney.

    Tapper said, “The president seems to think that borrowing money to pay the interest on the debt is not adding to the debt. I don’t understand that math.” He wanted Carney to explain it to him. Now, the whole White House press corps was laughing at the Administration.

    Carney replied, “What the president made clear is that we need to get to a place — and his budget absolutely does this — where we are no longer spending more than we’re taking in.” Except, making interest payments is spending. Everyone knows that. It’s a real obligation that must be paid, or the nation would default.

    Tapper tried again, saying, “I assume when the president calls for an adult conversation, he means that conversation should be forthright and politicians shouldn’t be hiding behind cute language such as ‘We will not be adding more to the national debt,’ even if hundreds of billions of dollars are being added to the national debt in interest — paid on debt that President Obama helped, himself, create.” Ouch.

    Now, Tapper was questioning the White House’s maturity to carry on an “adult conversation” as promised with the American people. Carney dodged, simply regurgitating the tired line to Tapper that the debt “has been created over a number of years, as you know. And we came in here with an economic crisis, the likes of which, I daresay, I think nobody in this room has ever seen, and which threatened to head straight into a depression if we didn’t act.”

    Now, the White House was making excuses. Carney’s very first press conference was not going well. Tapper was eating him for lunch, and then went in for the kill, finally asking of Carney, “Just to button this, you think that, ‘We will not be adding more to the national debt,’ is a statement that stands [up] to scrutiny?”

    Carney quickly replied with a straight face, “Absolutely, absolutely.” Really?

    More like absolutely absurd. What a lousy liar. A better campaign commercial could not have been contrived by the Republican National Committee for 2012.

    The best Tapper could say about the Obama statement was to call it “cute”. Nonetheless, Carney maintained that Obama “looks forward to working with Republicans and Democrats in Congress to, you know, deal with both the budget proposals and the long-term debt.”

    Of course, if congressional Republicans were mention the interest payments, they might wind up talking in circles with Obama, who childishly wants to quibble over who started adding to the debt first. Some “adult conversation”.

    The fact is, the nation really does need to get serious about all of its spending, including its rapidly escalating interest payments. If we do not, the debt will bury us.

    In 2021 alone, a total of $1.167 trillion in interest payments will be made both on public debt and the trust funds. That would be exactly 19.38 percent of the $6.02 trillion budget planned for that year, including all of the interest owed.

    The problem is that tax revenues would only be $4.923 trillion that year, resulting in approximately $1.09 trillion in new debt from interest being added to the debt.

    But not to worry, says Obama, “We will not be adding more to the national debt.”

    While everyone is laughing, the truth is that this is not really that funny. By 2031, interest alone will easily surpass $2.4 trillion every year. There will come a day when the principal and interest owed on the debt shall become too large roll over, and we’ll default. Then, the ensuing insolvency will be no laughing matter.

    Robert Romano is the Senior Editor of Americans for Limited Government.

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