Debt « POWIP

9Jun/101

PROGRESS! [UPDATED]

Yesterday, Reuters ran a story on a report by Treasury sent to Congress, with all the usual fanfare of a Friday afternoon, under-the-radar, data dump, detailing their projection, based on current levels of spending and revenus, that the US national debt should reach 19.6 trillion dollars by 2015; an amount that will represent 102% of GDP. Of course, the increase in GDP assumes growth in the economy, and may not include any "double dip" downturn as many economists are predicting. And, in fairness, it also can't take into account any serious spending reductions that may me legislated by Congress in the intervening time. I may be cynical and jaded, but I wouldn't hold my breath waiting for that to come to pass.

And what's the cause of the near soubling of the debt in that timeframe? According to Reuters:

The U.S. debt has grown rapidly with the economic downturn and government spending for the Wall Street bailout, the wars in Afghanistan and Iraq and the economic stimulus.

Yep...Just as I noted the other day; it's because of the wars, don't you see? Never mind that the combined cost of those actions are exceeded by the cost of the bailouts and the spendulus. And surprisingly Reuters makes no mention of the dramatic increase in discretionary spending that resulted from the Democrats enacting their 15 year "wish list" of expenditures once the won! had ascended to office. Nope, it's all because of Booooooooooooooosh! and his elective military campaigns-natch...

Nice try, but folks are wising up to this whole connivance. They know that spending is out of control, and that the day of reckoning is near unless as a nation we begin to act responsibly and live within our means.

But I will hand it to the Obamacrats, they have dramatically increased the rate at which our tax dollars, as well as our children's and grand-children's, are squandered. It's no mean feat to double the national debt in less than 2 Presidential terms, especially when it starts out at such a large number; remember, with the left percentages and multiples mean nothing, it's sheer magnitude baby! And by that, their favorite measure to demagogue, I figure they will have increased the debt by nearly as much as all the preceeding administrations since our nations founding.

Is that change you can believe in ? Or even believe?!?

Thanks to the 52% of voters who gave us this palavering putz President, and especially to all the RINOs, Brooks, Noonan, Buckley et al, and the entire MSM, who instead of being properly skeptical of the man with now avowed past, acted as a cheering section instead; the RINOs gave him cover from the right and helped sway the independents votes, because they too thought he was a good man...

[Update] Just as I suspected, the treasury projection not only assume that spending will in no way exceed the "sharp pencil" projections, based on budgeting, but also uses an unreasonably optimistic assumption that GDP growth will outstrip the historical average for the period of 1990-2009. Tyler Durden at Zerohedge provides both the razor sharp snark as well as bone-crunching analysis:

In a nutshell, the attached report pretends to forecast US debt and GDP levels. What it doesn't pretend to do, is to be the work product of a variety of pathological liars. Even as Geithner anticipates US total debt to hit $19.6 trillion by the end of 2015, somehow, in some parallel universe, he also anticipates US GDP will rise at a 5% CAGR for the next five years! Total US GDP, which was at $14.2 trillion for 2009, is expected to ramp up by 2.7% in 2010, and then really put on the afterburners in 2011 through 2015, averaging almost 6% each year, and hitting a stunning $19.2 trillion in 2015. The ridiculousness of this assumption is beyond comprehension. And even so, total debt/GDP will still be over 100% per the government's baseline assumptions. Alternatively, if one assumes, as PIMCO does, a GDP growth rate of 1.5% for the next 4-5 years courtesy of the 10% unemployment "new normal", total debt-GDP will hit 126% in 5 years. And this obviously excludes GSE, SSN and Medicare off balance sheet debt. Lastly, the Treasury assumes that even with 100% Debt to GDP, the funding cost on US market debt in 2015 will be only 4.7%, compared to the 1990-2009 average of 5.9%.

The chart below shows the US Treasury's baseline estimate. Keep in mind total debt will realistically be much higher than what is projected here. One notable observation is that the Treasury assumes that Intergovernmental Debt (i.e. funding for trust funds such as SSN etc), will only rise at around 4.5% each year. This is another chimera that will promptly blow up in the administration's face, now that SSN is net cashflow negative for the first time in history, and will need constant cash replenishment from the Treasury.

His post contains a really detailed analysis of the report, a link to the report itself, and more realistic projections. It contains a number of charts and, as always, excellent explanation. It's succinct, to the point, and a must read as the issue becomes more prominent in the political zietgeist.

I mean, if knowledge is power, this is the equivalent of nuclear weapons...