Spending Spree Leads to Damaging Debt
December 15, 2009
by: Roger Morse, Visiting Fellow

Government WasteWatch, Winter 2009

Over the past year, the federal government has gone on an unprecedented spending spree in the name of saving the economy.  But the amount of debt and other obligations that have been created are going to have a huge negative impact on the standard of living of  future generations.
 
On December 9, 2009, the debt of the U.S. government stood at $12,093,405,875,419.29.  That means each man, woman and child in the U.S. is responsible for $39,336.  Paying the interest on that enormous debt each year puts a huge financial burden on the government, and, ultimately, taxpayers.  According to the Treasury Department, gross interest on the debt for fiscal year 2009 (which ended on September 30, 2009) was $383 billion.
 
Not one penny of that money was available to be spent on anything else.  It didn’t buy a single round of ammunition for U.S. troops to defend themselves in a war zone.  It didn’t buy a single doctor visit for an elderly American on Medicare.  It didn’t buy a single hour in the classroom for a low-income student.  It didn’t buy a single hazmat suit to clean up an environmental mess.  It didn’t buy even a single ounce of concrete to fix our roads and bridges.
 
All that money simply went to pay off interest on the $12 trillion debt.
 
To put the $383 billion interest payment in perspective, that is more than five times the amount the federal government spends in the Department of Transportation to fund roads, bridges, airports, mass transit and railroads.  It is seven times greater than the total amount spent by the Department of Education.  It is also more than four times the total amount spent by the Veterans Affairs Department assisting those who served the country in the military.
 
In fact, the government spends just about the same amount on interest payments on the debt - getting nothing in return - as it spends on the Departments of Transportation, Education, Veterans Affairs, Homeland Security, State, and Housing and Urban Development combined.
 
Keep in mind that, because the Federal Reserve (Fed) has been buying up the debt at huge discounts to keep interest rates low, the full effects of this debt are mitigated.  When the Fed ends its buying binge and interest rates rise to more normal market rates, there will be an enormous jump in interest payments. At this point, every one percentage point increase in interest rates will mean about $80 billion more in interest payments on the debt each year.
 
But it gets even worse.  Over the next 10 years, the national debt is expected to rise to $19 trillion, with interest payments exceeding $700 billion in the year 2019.
 
Debt is not the only hazard facing the country.  Congress has put future generations on the hook for benefit payments that have not yet been funded.  Without passing any health care reform legislation that would add even more unfunded liabilities, the Medicare program currently has more than $36.3 trillion in benefits that have been promised, but are not funded.  Social Security has another $6.6 trillion in unfunded liabilities.  That’s almost $43 trillion dollars more that have already been obligated for future spending.
 
It is hard to grasp the enormity of $1 trillion.  Here are a few “fun” facts:

• One billion seconds takes almost 32 years.
• One trillion seconds takes 31,688 years.
• If you spent one million dollars every day since Jesus was born, you still would not have spent one trillion dollars.

Elected officials need to stop wasting money and get control over future liabilities.  Otherwise, there will be a huge negative impact on the standard of living for future generations.
 
Thomas Jefferson once wrote, “I sincerely believe... that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.”