Tuesday, January 06, 2009,5:22 AM
On The Exploding National Debt
Why aren't reporters - or pundits - asking a simple question of The Messiah: What happens when global creditors no longer see an upside to buying U.S. debt?

A follow-up question: What will a 2 trillion dollar annual deficit do to Chinese creditors' interest in buying dollars?

A third: Does anyone care about this looming disaster?

Let's go back to Saturday's Washington Post article ("U.S. Debt Expected To Soar This Year"):
For now, investors are frantically stuffing money into the relative safety of the U.S. Treasury, which has come to serve as the world's mattress in troubled times. Interest rates on Treasury bills have plummeted to historic lows, with some short-term investors literally giving the government money for free.

But about 40 percent of the debt held by private investors will mature in a year or less, according to Treasury officials. When those loans come due, the Treasury will have to borrow more money to repay them, even as it launches perhaps the most aggressive expansion of U.S. debt in modern history.

With the government planning to roll over its short-term loans into more stable, long-term securities, experts say investors are likely to demand a greater return on their money, saddling taxpayers with huge new interest payments for years to come. Some analysts also worry that foreign investors, the largest U.S. creditors, may prove unable to absorb the skyrocketing debt, undermining confidence in the United States as the bedrock of the global financial system.

"There's a time bomb in there somewhere," [Lou Crandall, chief economist at Wrightson ICAP] said, "but we don't know exactly where on the calendar it's planted." [my emphasis]
A time bomb.

That should frighten the crap out of those who are responsible for our fiscal well-being. It should, but it doesn't. They are racing headlong into a financial disaster like this country has never experienced before. And no one is asking questions. No one cares.

Couple that with Rich Lowry's prediction that Barack Obama will be forced to raise taxes in order to keep that time bomb ticking - "time" being the operative word:

During the campaign, Obama was careful always to say - less than honestly - that his spending proposals were paid for. Now, it doesn't matter. The spirit of Father Coughlin, who ranted at the beginning of the New Deal that Franklin Roosevelt had "to be stopped from being stopped," grips the land. Ohio Gov. Ted Strickland left a begging voice message with Obama Chief of Staff Rahm Emanuel that captured the moment perfectly: "Rahm, it's Ted. You've never failed me, and I need $5 billion."

The Congressional Budget Office is about to release a new estimate of the "baseline" (i.e., if nothing changes) budget deficit of roughly $950 billion a year. That's before Congress does anything else this year, when it's about to disgorge Obama's stimulus plan, and before Obama has even embarked on his expensive campaign promises in earnest.

The stimulus spending - or most of it - will eventually disappear, and Obama will have to raise taxes.
It's been said in recent years that Congress is spending us into oblivion. We'll soon be able to establish a date-certain for that inevitable occurrence.

And may God have mercy on us all.
 
posted by Jerry Fuhrman
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