In his waning months as emperor-in-chief, Barack Obama appears to be taking a page out of Louie XV’s playbook in which the French king declared: “After me, the deluge.” Yesterday, CBO released its latest long-term budget projection, and made it quite clear that there will indeed be a fiscal deluge after Obama’s drive-by presidency comes to an end.
The gross federal debt now stands at $19.366 trillion, roughly $8.7 trillion more than it was when Obama took office. It took from our nation’s founding until 2007 (which includes most of the profligate Bush presidency) to accrue the first $8.7 trillion in debt. The public’s share of the debt is just shy of $14 trillion, a $7.7 trillion increase since 2009. Yes, Obama more than doubled the public share of the debt during his presidency!
The gross federal debt, which includes intra-governmental debt comprised primarily of obligations for Social Security, federal pensions, and military pensions, is now 106 percent of the size of our economy and will forever grow larger than our GDP. When Obama was inaugurated, the gross debt was just 74 percent of GDP. If we look at just the public share of the debt, the numbers are even starker. In January 2009, the public share of the debt was just 44 percent of GDP; now it stands at 75.4 percent.
The trajectory is even worse: Here are the top five takeaways from a newly released CBO report on the debt:
- A Greek Sized Debt: By 2046, the public share of the debt will nearly double again, reaching 141% of GDP, a large upward revision relative to last year’s budget projection. But as the folks at Freedom Partners point out, as cited in a Congressional Quarterly article, if you include gross debt, which is comprised of the “money we owe ourselves,” that number will stand at 174 percent in 2046. Remember, intra-governmental debt includes obligations that must be met and will require new public debt or tax increases in order to meet them. What is significant about the number from Freedom Partners is that it is roughly where Greece’s public debt stands now relative to the size of its economy. Our future is Greece.
- Record Revenues Won’t Help: The Treasury is already taking in record revenues through taxation, yet the debt is still out of control because of the federal government’s astronomical spending. The historical average for annual revenue has been 17.4 percent of GDP. In 30 years, CBO estimates revenue flow to be at 19.4 percent, yet the debt will spiral out of control because spending will swallow up 28.2 percent of the economy every year. And remember, the estimates for economic growth and revenues are always revised downward over time, which means debt will climb even higher than projected, as evidenced from just a single-year jump in CBO’s projections. An alternative scenario from CBO has the public share of debt alone jumping to 173 percent of GDP in 30 years.
- Interest on Debt is Fastest Growing Expenditure: One of the reasons the debt has not already engulfed this country in a fiscal calamity is because of the artificially low interest rates servicing increased debt on the cheap. But a return to more normal interest rates, in conjunction with the growing size of the debt itself, will self-perpetuate interest on the debt as the fastest growing expenditure. It will quadruple from just 1.4 percent of the economy today to 5.8 percent in 30 years. Which means that the longer we wait to address the debt crisis, the steeper the punishment will be when the tab comes do. As CBO observes, “[G]rowth in net interest costs and growth in debt reinforce each other: Rising interest costs push up deficits and debt, and rising debt pushes up interest costs.”
- Lack of Free Market Health Care is Killing us: By far, the 800-pound gorilla in the budget is health care spending. As Investors Business Daily points out, in just 18 years “the federal government will spend more on health care than it does on defense, domestic discretionary programs and welfare programs combined.” And remember, CBO is not factoring in the near-certainty that private sector participation in the Obamacare exchanges will completely collapse, leading to direct single-payer health insurance for everyone.
- A Half Century of Economic Stagnation: The national debt is not just a number on a spreadsheet. It represents all of the wasted resources going towards growth of dependency and disincentivizing productivity instead of private investments and economic growth. This is not just a concern about future indebtedness and the projected growth of crushing interest payments; the debt is weighing down the economy today. While the deluge of default will come due after King Obama’s retirement, the loss of economic growth has already begun and will only get worse over time. According to CBO, not only will GDP growth remain at a dismal two percent for the next 30 years, real GNP per person, which is a good measure of individual income, will grow by just 1.3 percent over the same period. Hence, you are already paying for the crushing debt — the Democrat campaign finance dependency racket — in the form of reduced income. In conjunction with the $1.88 trillion annual regulatory burden on the economy, Americans are already paying more in the hidden tax of socialism (debt and regulations) than direct taxation.
Obama will exit the White House in about six months, but he will leave behind an indelible legacy of debt and economic stagnation that will mortgage the future of our posterity. It would be bad enough to leave a strong civil society with fiscal bankruptcy. However, when coupled with Obama’s other legacy — exacerbating the decline of the moral fabric and family structure of this society — the moral bankruptcy will likely overtake us before the Chinese foreclose on our economy.
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Author: Daniel Horowitz
Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.