Friday, November 27, 2009

Soon half of our U.S. National Debt will be interest!

Here's a new way to think about the U.S. government's epic borrowing: More than half* of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest. (*$4.8 trillion)

Why that's a problem:In 2015 alone, the estimated interest due - $533 billion - is equal to a third of the federal income taxes expected to be paid that year, said Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group.

And then it's Vicious Circle 101 - well known to anyone who has gotten too into hock with Visa and MasterCard. The more debt the country racks up, the more likely it becomes that creditors could demand a higher interest rate for making new loans to the government. Higher rates in turn make it harder to pay off the underlying debt because more and more money is going to pay off interest - money, by the way, which is also borrowed.


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