By Robert Romano – In February, when he presented his budget for the 2012 fiscal year, Barack Obama called for an “adult conversation” on the nation’s finances. Everyone laughed. His was a budget that would add on average $1.08 trillion to the national debt every single year until 2021, when it would total $26.3 trillion.
Perhaps it was fitting, then, that he began the discussion by delivering a speech to college students.
More like an adolescent than an adult, Obama was threatening that he has a credit card — and he’s not afraid to use it. He’s still going through puberty when it comes to having a real conversation about the debt crisis we face. On April 13, when he delivered his plan to “pay down our debt” at George Washington University, not once did he mention the size of the gargantuan national debt, now $14.2 trillion.
Not once did he mention that his own Office of Management and Budget projected a $1.645 trillion deficit for this year alone. He said, “This debate over budgets and deficits is about more than just numbers on a page.” But in this particular debate, numbers really matter. And Obama and all elected officials would do well to consider them carefully, because if these trends cannot be reversed, this debt will crush us.
This year alone, the debt will grow to be $15.4 trillion — larger than the entire economy. Total interest owed on the debt, including that owed to the Social Security and Medicare trust funds, will rise to over $430.4 billion, some 19.79 percent of the total $2.174 trillion of revenue.
Those numbers are particularly important. Moody’s has warned that when interest owed on the debt reaches 18 to 20 percent of revenue, the nation’s gold-plated Triple-A credit rating will be downgraded. If you count total interest payments, we’re already there!
But Obama ignores the critical problem of debt affordability, and proposes a budget that will likely find total interest soaring to over 24 percent of revenue by 2021. Soon, the total principal owed on the debt will become too large to even refinance, let alone ever be repaid.
Making matters worse, we’re barely even meeting our current obligations — and now only with a printing press. The Federal Reserve’s share of the national debt with QE2 has risen to about $1.35 trillion. By June, when the program ends, the central bank’s share of the debt will reach $1.5 trillion, more than 10 percent of the debt. That’s more than any other creditor, including China or Japan.
These are real numbers. And they will soon have real penalties for the American people, who may only learn too late that we can no longer kick the can down the road. As Americans for Limited Government President Bill Wilson noted in a recent letter to the Senate in support of Senator Orrin Hatch’s proposed Balanced Budget Amendment, “Printing money to refinance the debt cannot continue for long without very severe consequences, including a potential collapse of the dollar as the world’s reserve currency, hyperinflation, and a complete default on the nation’s obligations.”
But, Obama does not consider how much fiat money can be printed to pay the debt before real creditors demand some other means of repayment, because it does not fit into his unrealistic narrative that there’s any way to pay for all this.
In truth, it’s not about “the kind of future we want,” as Obama suggested, it’s about the kind of future we can afford. We have to live within our means, not beyond them. Obama blurs this distinction.
Obama commented on Republican proposals on the budget, saying, “their vision is less about reducing the deficit than it is about changing the basic social compact in America.” In Obama’s view, that compact must include a “right” for citizens to bankrupt their own children to pay for “entitlements”.
But what else should one expect from an adolescent conversation on the nation’s finances? Not a solution, that’s for sure.
That is because like most elected officials, Obama is disingenuous and prefers platitudes over solutions. And like an adolescent, with 2012 right around the corner, he craves attention, wants to take credit without doing any of the real work to restore order to the nation’s fiscal house — and wants to be taken seriously when his actions to date have been irresponsible at best and dangerous at worst.
If this is the beginning of the “adult” conversation Obama had in mind, the American people should expect the next 18 months to be filled with more red ink and devoid of any “hope” or “change”.
Robert Romano is the Senior Editor of Americans for Limited Government.
