American budget, deficit, and debts

http://www.americanthinker.com/2010/12/the_four_questions_every_liber.html
The four questions are:

1.What is total spending of the federal budget?

2.What is the federal deficit?

3.What is the national debt?

4.What was the most recent interest payment on the national debt?

You'll be surprised at the answers. The first impression you'll get is that most won't know the difference between "deficit" and "national debt." You see, liberals are all for spending your money, but they don't have a clue how much of it is being spent nor how much debt they're getting us into in order to do that spending. You'll also find that the answer to question #1 ranges from a low of several hundred billion to a trillion; no one, it seems, is able to get the answer to within $300-$400 billion.


The Four Answers

The next step is to correct their answers by crossing out what they've written and, beside it, writing down the right figures. They are:


1) Total spending for the federal budget for 2010 is projected to be approximately $3.6 trillion. The budget comprises total expenditures and total receipts by the federal government.

2) The federal deficit for 2010 is projected to be approximately $1.2 trillion. However, note that in 2009, the deficit was projected to be $407 billion but ended up being $1.4 trillion. The deficit is total expenditures less total receipts (such as income taxes) received. When receipts exceed expenditures, there is a surplus.

3) The national debt at the end of fiscal year 2010 is projected to be $14 trillion. This debt is the accumulation of every year's deficit since 1776 less all accumulated surpluses.

4) The annual interest payment on the National Debt for 2010 is projected to be $164 billion.


The Debt In 2015
Underneath the four answers, write this: "The debt in 2015 is projected to total $20 trillion."


The Extrapolation

Explain that the interest the government pays (#4) on the debt (#3) is raised by selling financial instruments such as Treasury Bills to investors (such as the People's Republic of China). These financial instruments are currently paying about 1.5% interest, which will result in the approximately $164 billion in interest expense to the federal government.

Here's where it gets interesting. Remind your liberal that interest rates fluctuate (Remember when interest rates almost reached 20% back in the early '80s?), as this graph demonstrates. Note this graph is the historical rates for three-month U.S. Treasury Bills, one of the very instruments used to service the debt. Also remind your liberal that we are experiencing historically low interest rates, which means that interest rates have only one direction in which to go.

Treasuries at 6% Paying Today's Debt

Then ask what he thinks will happen to interest rates if China and other purchasers of American debt stop buying, and what we would have to do in order to attract them back: will rates go up or down? Ask your liberal, "If interest rates on treasuries go up to just a modest 6% -- which is more than triple the current interest rate we are paying -- what will the annual interest payment be on just today's approximately $14-trillion national debt?" Here's the math:

$14,000,000,000,000 X 0.06 = $840,000,000,000.

That's an $840-billion annual interest payment on the current national debt.

Treasuries at 10% Paying Today's Debt

But interest rates can easily go up to 10%...after all we've seen much higher rates within our lifetimes. What would the annual interest expense be on the current debt level if we had to pay 10% a year in interest?

$14,000,000,000,000 X 0.10 = $1,400,000,000,000.

That's $1.4 trillion in annual interest payments on just the current national debt.

Treasuries at 6% and 10% in 2015

But we're told that at projected deficit levels the debt will reach $20 trillion in just four years. At 6% and 10%, the annual interest payments on the debt would be:

@ 6%: $1.2 trillion

@ 10%: $2 trillion

Note that the above two figures just service the debt; they don't reduce the principal of the debt. Note also that $2 trillion represents more than half of all current federal spending.

All the Signs Were There for the 2007 Financial Meltdown

Only a few astute individuals foresaw the global financial meltdown of 2007. Indeed, those few warned us and provided ample evidence: AIG's overselling of their credit default swaps, lax Freddie and Fannie rules for granting mortgages, etc. But we ignored them.

Now we look at those very same facts and figures from pre-2007 and think, of course! It was so obvious...how could we have missed it? The numbers were there for anyone to see. Trillions of dollars in credit default swaps liability on just the part of AIG, and if the market moved against it, the world economy collapses. And yet despite all the signs, despite all the public information readily available upon which any and all could perform the most rudimentary high school math, we missed everything.

There's another financial crisis looming. All the signs are there, all the numbers are right under our collective nose, and we all have access to calculators and spreadsheets on those free Microsoft programs that come on the laptops and desktops we own. But again, we're in full court press denial mode: ignoring what's sitting smack drab in front of us...and President Obama, his Democrat minions in Congress, and not just a few borrow and spend Bush 43 Republicans insist upon going down the same deficit path we've been tripping the light fantastic upon for the past decade of unbridled spending.

What to Do

Governments tax and spend; this is what they do. Indeed, it's what they're supposed to do. It's all part and parcel of running a country, and it can't be avoided. But as we all now know, things have simply gotten out of hand...and record deficits and a national debt approaching our annual GDP underline the insanity of the liberal spend spend spend credo.

We have come to accept declarations of political pundits who declare that "it is the end of America as we know it!" unless we heed whatever warning or policy they are promoting as part of the political lexicon. A hackneyed phrase, to be sure, and largely ignored or merely tolerated.

But in this instance, we may want to conclude that such a declaration is justified. Trillions in annual payments just to service the debt without even reducing it one iota does indeed justify alarm. As I see it, it means one of two things:

- Indebted servitude to our creditors for decades to come, a form of financial slavery in which at least half of every dollar in federal taxes goes to interest payments instead of government services; or

- Government-induced hyper-inflation in which the trillions in debt will be paid off, but the process will impoverish tens of millions of fixed-income Americans and irrevocably diminish the reputation of America on the world stage and global markets.

Either way, the America we've known up to now is over. And Republican 2010 campaign pledges to bring federal spending down to -- wow! -- 2008 levels simply don't cut it.

Even a balanced budget is not enough. What we need is a surplus budget, and we need it now -- not next year, not five years from now...even if it means financial pain, which it will.

An ounce of hurt now is going to be a whole lot better than a pound of excruciating pain later.

Tony Kondaks is the author of "Why Canada must end," which can be found in its entirety online at www.WhyCanadaMustEnd.com.

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