Obama’s mega-borrowing is predicated on a rather thin margin of safety. We can service nearly $2 trillion in additional debt this year—on top the of the existing $11 trillion—only because interest rates are so low.
But as a veteran of the near usury of the 1970s and early 1980s, I see no reason why interest rates won’t shoot up to 10% once the economy recovers and the U.S. has to convince lenders to buy our paper in an inflationary spiral. In other words, we could fork out each year about $150-200 billion in interest costs on our annual red ink, in addition to paying annually another trillion dollars to service the existing debt. (We forget that many of us young people in the 1970s and 1980s simply never bought anything new due to high interest: my first new car was not purchased until 1989 when interest was only 7.2% on it; my parents bought a small condo in 1980 for the unbelievably low rate of 8.8%, due only to redevelopment incentives in a bad neighborhood of Fresno. Inflation will be back, even in this quite different age of globalized competition and low wages.)
When Obama talks of a trillion here for health care, a trillion there for cap-and-trade, it has a chilling effect. Does he include the cost of interest? Where will the money came from? Who will pay the interest? Has he ever experienced the wages of such borrowing in his own life? Did he cut-back and save for his college or law school tuition, with part-time jobs? Did he ever run a business and see how hard it was to be $200 ahead at day’s end?
What destroys individuals, ruins families, and fells nations is debt—or rather the inability to service debt, and the cultural ramifications that follow. When farming, I used to see the futility in haggling over diesel prices, trying to buy fertilizer in bulk, or using used vineyard wire—when each day we were paying hundreds in dollars in interest on a “cut-rate” 14% crop loan.
That’s the cheerful part of his piece.
He’s put in words many of the things I have been feeling – and fearing – since Obama won the election and especially since he took office. I, too, remember the Carter years and what an immature, simplistic and ultimately ridiculous world view can do to this country in only a short time.
I’m looking at unemployment that is still going up, spending that is still going up and planning, plotting scheming and maneuvering by Obama and his pals to raise that spending even further. And I remember what inflation – mind-numbingly high inflation – can do to a country.
That’s the cheerful part of my reaction to Hanson’s effort.
Please, go over and read it all. After all, misery loves company.