United Liberty

Investors are worried about the size of our debt:

The nation’s debt clock is ticking faster than ever — and Wall Street is getting worried.

As the Obama administration racks up an unprecedented spending bill for bank bailouts, Detroit rescues, health care overhauls and stimulus plans, the bond market is starting to push up the cost of trillions of dollars in borrowing for the government.
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The trouble is that government borrowing risks crowding out private investment, driving up interest rates and potentially slowing a recovery still trying to take hold. That is why the Federal Reserve announced an extraordinary policy this year to buy back existing long-term debt — $300 billion over six months — to drive down yields. The strategy worked for a while, but now the impact of that decision appears to be wearing off as long-term interest rates tick up again.

Then there is the concern that the interest the government must pay on its debt obligations may become unsustainable or weigh on future generations. The Congressional Budget Office expects interest payments to more than quadruple in the next decade as Washington borrows and spends, to $806 billion by 2019 from $172 billion next year.

The Government Accountability Office (GAO) has put out information showing that debt held by the public (p. 3) will exceed 100% of GDP by 2030, hitting 300% of GDP just after 2050 and surpassing 600% of GDP by 2080. You can’t just increase taxes. That will only do so much, not to mention the levels of taxation needed will kill economic growth.

You can’t blame investors for worrying about sustainability with those numbers. It’s something we should all be concerned about. We’re screwed unless Washington reforms the way it spends money.