Will the US go bankrupt? Look at your interest payments on the debt

[wadestock]

http://www.willthomas.net/Convergence/Weekly/United_States.htm
Going Broke

The USA Is Bankrupt – What Now?
By William Thomas 11/28/04

“Under what conditions can it repay the money?” Rep. James Traficant Jr. asked Congress 11 years ago. “The estimated interest on the debt equals all the personal income tax paid by all Americans. Our government is so deep in debt that it cannot get out…We are here now in chapter 11.”
Much of this borrowing involves selling interest-bearing promissory notes called treasury bonds to foreign investors, whose eagerness to “buy America” has financed an illusory prosperity. But their largesse may be over. On Sept. 9, 2004, foreign investors already awash in Bush’s bad checks stopped buying that “paper”.
Hostage to foreign governments, trapped in a permanent war-making economy that exports almost nothing but debt, death, suffering, destruction and more jihadist recruits – Americans “maxed out” on debt and lacking personal savings are as unprepared as most of the rest of us for what is coming like a fast train through a narrow tunnel.
It’s 1929 all over
again. Back with a lot more debt to bail out this time around, Back in the Roaring Twenties, consumer debt was too high to be sustained. Even the stock market was being stoked by record purchases.
Sound familiar?
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“Though the timing is anyone’s guess, the US dollar is poised to be overwhelmed by the deficit,” warns the Asia Times.
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The USA owes its creditors about $4.4 trillion right now. Paying all that interest means more borrowing – which requires still more loans to keep “rolling over” all those 10-year Treasury notes as they become due for repayment plus interest.
But with the dollar plummeting in value and inflation rising, foreign lenders are losing confidence in the worth of Bush’s IOU’s. Oil-producing nations are saying they prefer payment in Euros, gold dinars (at left), or yak hides – anything but more bogus bucks.
Until a dew months ago, Asia’s central banks – particularly the big commercial banks in Japan and China – have been financing America’s huge appetite for consumer products, weapons and warfare. The interest alone on all those loans is unpayable. With total state and federal government debts currently passing $14 trillion dollars in a near-vertical climb, US taxpayers have shelled out $15 trillion in interest payments since 1960 – while the principal continues to rise.

Higher interest rates means more interest on the national debt, which is really the debt of American children, and their children – just as climate change really kicks in with increasingly costly catastrophes.
But despite a decade’s prediction of economic doom, financial meltdown hasn’t happened yet. And it won’t, runs the counter-argument, because global interdependence means that everyone must maintain the illusion of solvency – or go down together.
Still, if someone blinks, all those debt bombs blow up at once.
That someone could be China.
Unhappily, the self-restraining domino theory of Mutually Assured Financial Destruction has a fatal flaw. As a financial blogger writes: “Asian central banks don't have to sell their existing Treasuries for the dollar to come under pressure. All they have to do is to stop buying new Treasuries.”
This is already happening.
Foreigners have stopped buying US stocks. From net purchases of $9.7 billion on Wall Street in July, offshore investors turned to a $2.1 billion sell-off last August. Private foreign investors also sold $4.4 billion more in T-bills than they bought that month. In fact, all foreign investment into the United States has fallen off sharply. The Institute for International Economics’ John Williamson says that foreclosing on Uncle Sam “wouldn't be in the interest of the world. But any one country might think, ‘I'll beat the crowd and diversify first.’”
The Catch-22 dilemma is that whether acting individually or internationally, the smartest precautionary moves – curbing spending, reducing personal debt, reducing “exposure” in the US stock market and the US dollar – could also crash a global casino dominated by debt and the dollar.
The collapse of the greenback and America’s faulty empire could come as quickly as the fall of the former Soviet Union – and for many of the same reasons. You might want to plant a winter garden. And throw a few cans of beans in the cupboard.

Also
http://www.house.gov/larsen/wida/reality.pdf
http://www.house.gov/apps/list/speech/wa02_larsen/morenews/reality.html

“Why Younger Generations Should be Concerned about the Deficit”

“The report points out that at the end of fiscal year 2003, the federal debt and the accumulation of all previous deficits, topped $6.7 trillion and is projected to reach $13.3 trillion by the end of 2014.”

"The $159 billion in interest paid on publicly held debt in 2004, combined with $163 billion in interest paid to the Social Security Trust Fund and other government trust accounts, averages out to a staggering $1,100 'debt tax' for every American."

Go to page 11 and study the graph which shows the Bush policy will result in the budget being permanently in deficit.

Got to page 14, and study graph which shows tax cuts are greater than social security and medicade payments combined.

also good reading
http://www.federalbudget.com/
http://www.uwsa.com/uwsa-usdebt.html
http://www.mises.org/fullstory.aspx?control=1423
http://home.att.net/~mwhodges/debt_a.htm
http://www.publicdebt.treas.gov/opd/opdint.htm
The interest expense on the National Debt is the third largest expense in the federal budget. Only Defense and income redistribution (The Departments of Health and Human Services, HUD, and Agriculture (food stamps)) are higher. Do you have "Compassion" for the lower income earners?

How much will you pay on the national debt out of your tax dollar this 2004 tax year?

[ThoughtCriminal]

1. And with interest rates rising the cost will grow

I'm pretty sure the already bogus White House defecit projections assume stable interest rates.

[Mike Niendorff]

2. re: "debt tax"

Talking about a "debt tax" is an excellent way to state the core issue here, and I'd love to hear more Dems and progressives utilizing this term.

It reminds people that the Reagan/Bush/Bush debt is not just numbers on paper, it's money straight out of their pockets each and every year. Some of these so-called "conservative" middle class voters have to start realizing that they can't lower their tax burden by voting for people who max out the nation's credit card while simultaneously shifting the payment burden further onto the middle class. It's just flat-out nuts, and the longer it keeps up, the worse it gets.


MDN

[wadestock]

3. What I'd love to see.....

Is a public awareness that in fact the tax breaks that were given are effectively overwhelmed by these yearly interest payments we all have to make.

I've posted before rigorously on this....and even did a personal budget of my own tax payments on this interest during the 90s....concluding it would add to sending my 13 year old to college for one year for instance.

Most people don't even do their taxes or take note of that interesting little pie chart that comes with their 1040 booklet that shows outlays.

Well those outlays on interest payments are going to be approach 20% of our tax dollar over the next few years. Now this article on the US going bankrupt exposes an interesting additional fact. Since the debt IS NOT going to be brought under control, these rising interest payments plus general bad financing image creates a situation where we may not be able to simply "ride out" the problem.

Reagan always used his rule of thumb....we can "grow our way out of debt"....and in fact we've gone past that point. The freeper line has been "hey look at the debt as a percentage of GNP"...and even that's going by the wayside.

We're in for some really shaky times and the sooner people jump on board with some of these basics the better.

[Mike Niendorff]

4. well said.

That "debt as % of GDP" has always bothered me, too, because debt isn't actually paid out of GDP -- it's paid out of gross tax receipts, which is an entirely different thing. Also, the argument doesn't take into account how the burdens and benefits of that debt are actually spread around, relative to the population as a whole. Personally, I think a lot of the Reagan/Bush lines you cite are just convenient rationalizations that allow political partisans to gloss over these questions so that they can keep promoting their particular agenda, consequences be damned. But, as you say, consequences have a nasty way of catching up with us, whether we want them to or not.


MDN

[wadestock]

5. I don't know if you checked this out....

http://home.att.net/~mwhodges/debt_a.htm

That website I listed has some really interesting discussion about the debt...and you might want to check out how they're jacking up the GNP figures to work in their favor.

That article is also very scary in terms of giving one the sobering realization that we were no where out of the woods in 2000 after Clinton/Gore HAD accomplished quite a bit to bring the deficit to a surplus and total debt down by 500B. I come away thinking that it was almost MANDATORY that we stay in that mode for another 8 years to get back to where this guy thinks would be more of a tolerable situation.

Instead, we will have 8 years of financial poison.

[Fred_Fury]

6. Yes we will go bankrupt

Capitalism is a failure. China is growing faster than any other country, and look at their form of government. perhaps we should emulate them, eh?

[Bluebear]

7. Emulate China? No. Pay our bills, yes. n/t

[wadestock]

8. There is one thing we can emulate....

Let's have a government that can make decisions which are in the true business interests of the majority of the people.

[htuttle]

12. China's form of government is fascism/state capitalism now

They gave up Communism some years ago.

But don't worry, fascism is exactly where Bush plans on taking us. As soon as we are making the same wages they are in China, all will be just fine!

[MadHound]

9. Yep, more big signs that our economy, our country is going into the toilet

We are facing a perfect storm of factors that will drown our country. Peak oil, outrageous debt, both personally and collectively, trade defecits going ever upwards, all of this and more are the early warning signs that our country as we know it is soon going to come to an end. Are you ready?

If not, start now. Rid yourself of as much personal debt as you can. Pay off those credit cards, then cut them up. Pay off as much as you possibly can on your mortage. Pay off your car loan, and if you're thinking of getting another car soon, pay cash. Become as self sufficient as you possibly can. Plant a garden, put up some solar panels, and if at all possible, get yourself out to the country. It has been proven time and again that it is easier to survive in the rural areas of our country when times are tough than surviving in urban areas. Invest in some gold, not paper shares, not Euros(if the US goes down, it will drag most of the rest of the world with it), but real, solid gold.

If you're thinking of moving overseas, don't. Those who survive the best have a support system in place to back them up. If you move overseas, you're leaving that support system behind, and since this crash is going to come sooner rather than later, you probably won't have time to build up a support system overseas. And like I said earlier, when the US goes down, it is going to take the rest of the world with it.

It is best to start preparations now, rather than wait until it is too late. And while I, and many many others might be wrong in our doom and gloom predictions, it always best to err on the side of caution. At worst, you will be thought of as eccentric if matters don't go belly up. And hey, what's so bad about eccentric, especially if you're saving money in the process.

[gpandas]

10. if economy tanks...

the neocons will simply kill whoever they must to insure american wealth.

[wadestock]

13. If being the world's "peace keeping" force were profitable....

Then maybe they'd have a chance?

One huge flaw in Thomas Barnett's model of us filling the "gap" with US military might and how this will lead to flourishing capitalism.

There are actually many of these neocons that believe Iraq will be the new mecca of industrialization and capitalism. Perhaps it is there they want to escape with its built in flat tax, etc.

[PROGRESSIVE1]

11. maybe then people with vote out the Rethugs.