Paying Interest on the National Debt

[What Would Jesus Do?]

Somewhere in one of these threads someone posted a chart showing revenues, expenditures, deficits and such. IIRC, this year's outlay for interest was around $250 billion.

To me, interest is like a speeding ticket. You pay the money and you get nothing. Sure, sure, we got whatever we spent the borrowed money on. So, on an individual or family level, you got a house, or a car, or a college education. The interest is still pouring money down a hole, but you did get something that you wanted and that probably has merit.

But if Congress spent on unnecessary wars, or tax breaks for the rich, or an Obamaphone for every poor person, are you happy paying a quarter of a trillion dollars every year on that? Did you enjoy that war? Are you getting those tax breaks? How's that Obamaphone? I'm still waiting for my free Chrysler from the first auto bailout.

OK, OK, I assume nobody is happy with that.

And yet, as became very obvious in the poll on raising tax rates on the rich, not very many people are willing to stop borrowing and actually start paying the bills.

Nobody is claiming we can't afford to pay our bills. Clearly we can. It's just that most Americans don't want to pay more themselves. And a surprising number of Americans don't even want those who have a lot of money to pay more so we can pay the nation's bills.

So here's one more thing to think about. What interest rate are we paying? That's $250 billion on a debt of roughly $17 trillion. Do the math.

How much do you think we'll be paying in interest when QE ends and rates are allowed to float? $500 billion? A $trillion? Or to put it another way, will we EVER be able to afford to end QE and let rates float?

 

[L. Wade Childress]

the bonds are already issued. coupons are fixed for the most part so the rate paid is not going to go up unless nothing changes and until after bonds roll off and replaced with higher coupon securities.

 

[L. Wade Childress]

also, QE is done

 

[L. Wade Childress]

and rates currently float. in fact the 10 yr yield is up almost 50 bps since early Feb

 

[bagdropper]

All the more reason why cutting spending goes hand in hand with this mess.

Nobody here advocates truly to the US not paying the bills. What we're saying is reduce the bills. And that means getting spending down big time along with any tax increase. There is absolutely no reason why we cannot do both.

 

[What Would Jesus Do?]

also, QE is done

Still phasing it out, I think, but maybe they have finished phasing. I haven't paid close attention. Certainly they announced that it is stopping.

The Fed has a number of ways to keep rates artificially low even when it seems like rates are allowed to float. The action of buying low interest paper from ourselves, depresses rates. When that stops, they still have the usual tools regulating rates for overnight and inter-bank loans and so on. But without buying, the current low rates will filter through. And then where will rates settle?

Hard to predict. We could have smooth sailing. But there are serious risks of either high inflation or dangerous deflation. If we don't yo-yo into a depression (a low probability) we'll probably see rates going up to at least what we used to see. 3%, 4%, maybe more. What will the payment on the national debt look like then?

Can we afford it?

 

[What Would Jesus Do?]

All the more reason why cutting spending goes hand in hand with this mess.

Nobody here advocates truly to the US not paying the bills. What we're saying is reduce the bills. And that means getting spending down big time along with any tax increase. There is absolutely no reason why we cannot do both.

Your side says we can't take in more revenues to pay the bills because the liberals will look at that as extra money and will just find ways to spend it - so we will still have deficits that we have to borrow to cover.

We lefties believe that you can't cut programs such that the current revenues will pay the bills because conservatives will will look at that as freeing up money and will just pass more tax cuts for the rich - so we'll keep on having deficits and borrowing to pay the bills.

No matter who wins the argument in the long run, can we at least agree that we should pay the bills we currently owe? You seem to be saying you don't disagree with that. And yet I can't get any cons on this board to agree to raise the revenues to pay the current bills.

If you wish, pass the revenue enhancing legislation with the clear proviso that the money can NOT be used for new programs. If you wish, put a moratorium on all new programs for a few years, until we get the hang of this novel idea of paying the bills. Perhaps another proviso that if there is any extra revenue, it goes toward paying down the debt - and not to tax cuts. Both con and lib fears addressed.

After a few years of that, we revisit. Maybe we can agree to cut spending at that point. Maybe not. But at least we'll be paying our bills.

 

[L. Wade Childress]

they are currently reinvesting maturities and income but it is expected that the balance sheet should shrink back closer to normal organically by 2020. they will likely do reinvesting in 2016 because a half trillion is scheduled to mature.

 

[Skidlt]

To me the solution is quite simple and will never happen. Freeze federal spending levels, make entitlement modifications for SS and Medicare now, and spend the next leglislative session after the next presidential election combining duplicative federal programs. No new programs, czars, departments, no new tax cuts or "revenue" enhancements - basically a delayering that will get us a better bang for the buck and truly help people in need.

I am conservative/libertarian, but realize that the federal government is not going away nor should it. We really need to get back to a limited federal government and let the states do the hard work. Let the states tax more or less, let the states add to the benefits the federal government pays, let the states thrive or fail depending on their choices. Fifty little experiments. People will flow to the most forward looking states based on their individual preferences and the states that fail will have plenty of other successful examples to emulate.

We have much more power as individuals to influence our state and local politicians - power to the people.

 

[hawkiniowacity]

Your side says we can't take in more revenues to pay the bills because the liberals will look at that as extra money and will just find ways to spend it - so we will still have deficits that we have to borrow to cover.

We lefties believe that you can't cut programs such that the current revenues will pay the bills because conservatives will will look at that as freeing up money and will just pass more tax cuts for the rich - so we'll keep on having deficits and borrowing to pay the bills.

No matter who wins the argument in the long run, can we at least agree that we should pay the bills we currently owe? You seem to be saying you don't disagree with that. And yet I can't get any cons on this board to agree to raise the revenues to pay the current bills.

If you wish, pass the revenue enhancing legislation with the clear proviso that the money can NOT be used for new programs. If you wish, put a moratorium on all new programs for a few years, until we get the hang of this novel idea of paying the bills. Perhaps another proviso that if there is any extra revenue, it goes toward paying down the debt - and not to tax cuts. Both con and lib fears addressed.

After a few years of that, we revisit. Maybe we can agree to cut spending at that point. Maybe not. But at least we'll be paying our bills.

For every percent of my income i have to pay i want everyone in the or under the 33% tax bracket to be hit with the same percentage increase. Is that fair? 1% of my salary equals far greater than someone making 50k, however Im willing to sacrifice a bit more if everyone else is. Please note, id also need a balanced budget badlsed on current revenues and have the increased specifically earmarked for only debt reduction. You on board?

 

[TexMichFan]

Somewhere in one of these threads someone posted a chart showing revenues, expenditures, deficits and such. IIRC, this year's outlay for interest was around $250 billion.

To me, interest is like a speeding ticket. You pay the money and you get nothing. Sure, sure, we got whatever we spent the borrowed money on. So, on an individual or family level, you got a house, or a car, or a college education. The interest is still pouring money down a hole, but you did get something that you wanted and that probably has merit.

But if Congress spent on unnecessary wars, or tax breaks for the rich, or an Obamaphone for every poor person, are you happy paying a quarter of a trillion dollars every year on that? Did you enjoy that war? Are you getting those tax breaks? How's that Obamaphone? I'm still waiting for my free Chrysler from the first auto bailout.

OK, OK, I assume nobody is happy with that.

And yet, as became very obvious in the poll on raising tax rates on the rich, not very many people are willing to stop borrowing and actually start paying the bills.

Nobody is claiming we can't afford to pay our bills. Clearly we can. It's just that most Americans don't want to pay more themselves. And a surprising number of Americans don't even want those who have a lot of money to pay more so we can pay the nation's bills.

So here's one more thing to think about. What interest rate are we paying? That's $250 billion on a debt of roughly $17 trillion. Do the math.

How much do you think we'll be paying in interest when QE ends and rates are allowed to float? $500 billion? A $trillion? Or to put it another way, will we EVER be able to afford to end QE and let rates float?

Your poll did not ask if we would support raising taxes to pay down debt or even stabilize where we are at. The question was would we support government redistribution of wealth by higher taxes on the rich.

Two very different questions for me. Support paying down debt - yes - redistribution, that one would be have to be very focused for me. I see your question in the poll as new spending on new programs when as you point out we can't afford the ones we currently have.

 

[dandh]

Somewhere in one of these threads someone posted a chart showing revenues, expenditures, deficits and such. IIRC, this year's outlay for interest was around $250 billion.

How much do you think we'll be paying in interest when QE ends and rates are allowed to float? $500 billion? A $trillion? Or to put it another way, will we EVER be able to afford to end QE and let rates float?

The ten-year bond historically averages around 4%, it's a little over 2 right now. In time, our costs should approximately double on the current debt. Could spike higher, or stay lower, but in time it should cost us about twice as much as it currently does, unless there is substantial inflation. Then it could go much higher.

There will be a delay in the increase in cost because, as another poster mentioned, bonds have already been issued. However, as those mature we'll have to borrow that money again, as we really never seem to be able to pay down the principle for any extended period of time.

 

[What Would Jesus Do?]

For every percent of my income i have to pay i want everyone in the or under the 33% tax bracket to be hit with the same percentage increase. Is that fair? 1% of my salary equals far greater than someone making 50k, however Im willing to sacrifice a bit more if everyone else is. Please note, id also need a balanced budget badlsed on current revenues and have the increased specifically earmarked for only debt reduction. You on board?

I think this is all we need to get started on an approach we can agree on. You're willing to pay a bit more, I'm willing to pay a bit more, we want it to be fair. The devil will be in the details, but that's a perfectly reasonable starting point.

I'll go even further. I'd probably be willing to accept your deal just as you said it IF I thought our current tax system was reasonable and fair. I don't think it is, so I'm going to want to address that in our negotiations.

I mean suppose we ditched some of the loopholes and scams and outdated social engineering that's built into our current system. And suppose we ended up with a moderately progressive scale such that poor Joe is paying 10%, I'm paying 15%, you're paying 20%, and Bill is paying 25%. Let's assume that leaves us short of revenue. Your proposal, if I'm understanding it, would bump everybody up a percent. Or whatever it takes to pay the bills and balance the budget. But each bracket goes up the same.

Being a lefty, I'd prefer that to go up proportionately the same and I would argue for that. But, frankly, I could live with this. It flattens the tax scale to do it this way, but if it isn't too flat to begin with, it's workable.

 

[What Would Jesus Do?]

The ten-year bond historically averages around 4%, it's a little over 2 right now. In time, our costs should approximately double on the current debt. Could spike higher, or stay lower, but in time it should cost us about twice as much as it currently does, unless there is substantial inflation. Then it could go much higher.

There will be a delay in the increase in cost because, as another poster mentioned, bonds have already been issued. However, as those mature we'll have to borrow that money again, as we really never seem to be able to pay down the principle for any extended period of time.

This is in line with what I am thinking. So the interest bill doubles. Except that we've probably added another 20-30% to the size of the national debt by then, so it goes from $250ish billion to $700ish billion in, what, 5 years, give or take?

Of course we can keep it down some by paying the bills. Then we get the rate increase, but the debt itself doesn't keep swelling.

 

[What Would Jesus Do?]

Your poll did not ask if we would support raising taxes to pay down debt or even stabilize where we are at. The question was would we support government redistribution of wealth by higher taxes on the rich.

Two very different questions for me. Support paying down debt - yes - redistribution, that one would be have to be very focused for me. I see your question in the poll as new spending on new programs when as you point out we can't afford the ones we currently have.

True. But I was just reposting the Gallop Poll question in that thread to see how HROT would answer (much less favorably, as it turns out). But the conversation in that thread made it clear that many here won't agree to raising taxes even just to pay existing bills. It's like they are saying "my bills are too high so I'm only going to pay 70% of my mortgage payment." Which doesn't make a lot of sense to me.

Sounds like you would be willing to see taxes hiked to pay the bills - and even to pay down on the debt. If we could get conservatives to go along, we might get somewhere.

It's funny . . . it wasn't that long ago that the conservatives were screaming for balanced budgets and paying down the debt. At some point, they stopped. And now it's lefties like me and the occasional libertarian who bring it up.

 

[ArawakHawk]

$20 trillion of debt , bloated government spending with inflation escalation pensions. Neither party has a plan. People who do not work make more than those who do. We keep stealing money from our grandkids. We keep rolling out these same cronies Hillary and Jeb. We are becoming India with the Ghandi family in charge for decades . We need to return to the original idea that only the national defense and treasury are managed by central goverment.

 

[dandh]

This is in line with what I am thinking. So the interest bill doubles. Except that we've probably added another 20-30% to the size of the national debt by then, so it goes from $250ish billion to $700ish billion in, what, 5 years, give or take?

Of course we can keep it down some by paying the bills. Then we get the rate increase, but the debt itself doesn't keep swelling.

Not sure when, but it will get there sooner than we'd like. The increase in the debt itself is probably a bigger problem over time than the rates - at some point in the next twenty years we may be spending more for interest than for defense.

 

[binsfeldcyhawk2]

All the more reason why cutting spending goes hand in hand with this mess.

Nobody here advocates truly to the US not paying the bills. What we're saying is reduce the bills. And that means getting spending down big time along with any tax increase. There is absolutely no reason why we cannot do both.

Totally agree with this......problem is neither party really advocates for this...Dems want to raise taxes but also increase spending...Repubs decrease taxes..cut some spending "entitlements" while increasing defense

 

[TexMichFan]

True. But I was just reposting the Gallop Poll question in that thread to see how HROT would answer (much less favorably, as it turns out). But the conversation in that thread made it clear that many here won't agree to raising taxes even just to pay existing bills. It's like they are saying "my bills are too high so I'm only going to pay 70% of my mortgage payment." Which doesn't make a lot of sense to me.

Sounds like you would be willing to see taxes hiked to pay the bills - and even to pay down on the debt. If we could get conservatives to go along, we might get somewhere.

It's funny . . . it wasn't that long ago that the conservatives were screaming for balanced budgets and paying down the debt. At some point, they stopped. And now it's lefties like me and the occasional libertarian who bring it up.

As a conservative I could support fixing the problem but not expanding the problem. Spending cuts in exchange for tax increases is a campaign solution for both parties to hang their hat on but fixes nothing because the increases would be spent to expand and not fix. Once we fixed what we have done then we can argue about expanding government - just have to paid for it without borrowing. We could do it during the Clinton years and regardless of who was responsible I just care that it happened.

I think you posted holding are elected officials accountable to earn our votes and that is very much our problem. We vote for the promise over results. I feel very confident that a current candidate Obama would find all kinds of problem with the economy of President Obama.

 

[What Would Jesus Do?]

As a conservative I could support fixing the problem but not expanding the problem. Spending cuts in exchange for tax increases is a campaign solution for both parties to hang their hat on but fixes nothing because the increases would be spent to expand and not fix. Once we fixed what we have done then we can argue about expanding government - just have to paid for it without borrowing. We could do it during the Clinton years and regardless of who was responsible I just care that it happened.

I think you posted holding are elected officials accountable to earn our votes and that is very much our problem. We vote for the promise over results. I feel very confident that a current candidate Obama would find all kinds of problem with the economy of President Obama.

I disagree with spending cuts for the sake of spending cuts. The problem isn't how much we spend. The problem is that we spend too much on the wrong things and even when we are spending on the right things we too often spend unwisely and don't get our money's worth.

If we had a democratically-elected Congress that did its job of working for the people and they decided to have big programs that cost a lot or small programs that cost very little, I could go along with either of those directions - because I could always work to change them in an honest democratic process, if I thought they were wrong. But whichever way we go, we should pay the bills. With the usual caveats about emergencies.

 

[What Would Jesus Do?]

Nobody here advocates truly to the US not paying the bills. What we're saying is reduce the bills. And that means getting spending down big time along with any tax increase. There is absolutely no reason why we cannot do both.

Totally agree with this......problem is neither party really advocates for this...Dems want to raise taxes but also increase spending...Repubs decrease taxes..cut some spending "entitlements" while increasing defense

The problem is that we won't agree on what to cut.

So when cons say they won't pay the bills without cutting spending, they are actually saying "we won't pay the bills." Which, of course, is exactly what has been happening for all but one year in the last however many decades.

If, as some of our cons are now saying, you actually agree that we should pay the bills, and if libs like me also agree that we should pay the bills, why don't we pay the bills?

 

[L. Wade Childress]

anyone know what percent of new debt refunds maturing bonds?

 

[SalAunese]

anyone know what percent of new debt refunds maturing bonds?

I'm 100% sure the OP has no idea.

 

[ChrisVarick]

Blaming any of it on an "Obamaphone" clearly shows your agenda.