Paul Revere is in his 20s, and is concerned about the impact of the growing national debt on his generation. He is a regular ConservativeHome contributor.
With the long-expected downgrade of America’s long-term expectations by Moody’s, and the immediate downgrade of America’s bond rating by S&P on Friday evening, politicians should have an interesting weekend. This downgrade could very well lead to higher interest payments- and an extra one percent rate hike would equal $150 billion in annual payments. That’s about 4% of the 2011 federal budget.
Of all the analysis at the link above, the takeaway is the following (paraphrased): the recent debt deal did not cut enough future debt; the political debacle surrounding the debt deal showed political weakness and political inability to address the problem; and neither tax increases or significant entitlement reforms are on the horizon.
Let’s look at a few items related to all of this:
- This year alone, the deficit— the annual payments by Congress that are spent with borrowed money— is expected to be $1.6 trillion. This means each of the 150 million workers in America will owe $10,667 above and beyond their own personal debt by the end of the fiscal year, September 30.
- Throughout 2011, Congress has debated how much to cut from that $10, 667. In the most recent debate, on whether or not to allow Congress to borrow more money, the final plan cut less than 10% of the expected debt per worker in 2021. Workers, you can thank your Member of Congress for bringing your portion of the public debt in 2021 from $161,637 to just over $146,000. This is in addition to any credit card, housing, car and college debt you may have incurred.
- Prior to the most recent changes to the government’s estimates on the life of Social Security and Medicare, payroll taxes were expected to rise from 15.3% of income to 25.07%. With the new estimates shaving a year off the life of Social Security, and five years off of the life of the hospital fund of Medicare, that expectation may have gotten much worse.
Of course, instead of paying extra Social Security taxes, you could just lose 22% of your scheduled benefits. Either/or.
- In fiscal year 2010, interest payments totaled $414 billion. Through five-sixths (83.333%) of FY 2011, interest payments have totaled $413 billion. While the year-end calculation of interest payments is not a straight-line calculation, if we end up with the $1.6 trillion deficit CBO estimated, our national debt will be about $15.1 trillion. This means our interest alone in 2011 will be $445 billion- fully 11.71% of the federal budget.
With the downgrade, of course, those payments could be about one-third larger.
When it comes down to it, old people won’t be catching the full fallout of America’s failed fiscal policies. It will be the young people who can’t get jobs and thus can’t invest, pay off personal debt or buy their first home prior to 30. It will be the young people who can’t afford to retire before 75 because higher taxes will decimate their paychecks. It will be the young people who will watch as America turns into the failed empires of Rome, Napoleonic France and the USSR— and who will be unable to pass along to their own children a better way of life.
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