CBO: Federal Government's Net Interest Cost to Quadruple Over 10 Years

    A Congressional Budget Office report released in early February projects that net interest paid on the national debt will increase at nearly 14% per year for the next 10 years, "almost quadrupling in dollar terms" during that time.  The CBO makes the assumption that interest rates will return to more typical levels after being held down by Federal Reserve policy to near zero percent in recent years.  This observation is highlighted in a Monday blog post on the website of the CBO:

The government’s net interest costs are projected to increase rapidly, by an average of roughly 14 percent per year, almost quadrupling in dollar terms between 2014 and 2024, as interest rates return to more typical levels and federal debt continues to mount. As a share of GDP, they are projected to rise from 1.3 percent in 2014 to 3.3 percent in 2024.

    The CBO provides the following graph to illustrate the projections:

    Also notable is the continued increase in health care expenditures, which are projected to increase from 4.8% of the federal budget to 6.1% in 2024, a ten-year increase of 27%.  Social Security's share of the federal budget is projected to rise as well, while discretionary expenses, both defense and non-defense will continue to fall.  Other mandatory spending is projected to spike in 2015, but then continue to fall as a percentage of the total budget.
    The CBO also notes that, assuming "current laws generally remain the same -- total annual outlays rise by $2.5 trillion from 2014 to 2024, reaching $6.0 trillion, or 22.4 percent of GDP, by the end of that period."

National Science Foundation: $400,000 for Guppy Study

    The National Science Foundation (NSF) has requested $7.373 billion from Congress for fiscal year 2013, an increase of $340 million (4.8%) over 2012. According to an announcement on Thursday, $400,000 of that (spread over three years) will be going to fund guppy research.  Colorado State University announced the grant on January 31st for a study to investigate "the effects of genes moving from one population to another." The press release explains further:

Chris Funk and Lisa Angeloni, assistant professors of biology at CSU, and their student teams tackle the dilemma of when to artificially induce migration between populations to rescue them from decline by getting up close and personal with Trinidadian guppies. These small fish, although not at risk of extinction themselves, make for an excellent model system to study the effects of introductions on local adaptation and population growth.

    The purpose of the study is help biologists develop strategies for helping to rescue declining species from extinction. Conservation is a noble and justifiable (in some cases) goal and government's role dates back at least to President Teddy Roosevelt, although the National Science Foundation did not come along until 1950. However, "conservation" has taken a hit as efforts have sometimes focused on what appear to be less than justifiable goals (the snail darter, the Northern spotted owl, and some kind of desert rat whose exact name escapes me at the moment.)

    Currently, however, the United States government is over $16 trillion dollars in debt. Spending $400,000 on conservation at this juncture just doesn't pass the if-you-don't-need-it-to-keep-the-lights-on test (especially when the subject of the study is guppies, whose current world population according to my completely unscientific estimate is coincidentally also just over 16 trillion.) As an accountant, I just can't help thinking it ironic that in my line of work, the acronym of the National Science Foundation, NSF, is more commonly interpreted as Non Sufficient Funds  -- meaning a bounced check.

    Now I am sure for every example like the guppy study (or any number of examples Sen. Tom Coburn came up with a couple of years ago in his report on the NSF,) someone can give an example of how an NSF grant produced some remarkable discovery that has improved life for everyone (and not just guppies.) But until the U.S. government starts seeing a lot more black ink in the balance column of its check register, the National Science Foundation should have to face the fact that the taxpayers have bigger fish to fry.

The Five Trillion Dollar Tweet

    The Obama campaign has raised the bar on gall, or perhaps cluelessness.  Here's a tweet from Tuesday afternoon from the Orwellian TruthTeam2012:

One almost gets the sense it's an inside joke-tweet that someone sent out accidentally, a la Anthony Weiner.  Did a TruthTeam member not recognize the irony that the national debt has increased by $5 trillion since President Obama took office, at least partly due to the nearly $1 trillion "stimulus" that "loaded up" the government with more debt?  This is the latest in a series of misfires just this week from the Obama campaign that raises the question, is the 2008 magic really gone?  If not, the Obama campaign and their TruthTeam are certainly chipping away at it, tweet by tweet.

Responsibility Bites

    The latest push by the Obama administration to pander to a segment of the electorate involves the youth vote and student loans.  The White House expresses great concern that graduating students should not be saddled with so much debt upon leaving college: "In 2010, graduates who took out loans left college owing an average of more than $25,000."  The press release goes on to note:

On July 1, 2012, the interest rates on subsidized Stafford student loans are slated to double from 3.4% to 6.8%. To out-educate our global competitors and make college more affordable, Congress needs to stop the interest rate on these student loans from doubling.
If Congress doesn’t act before July 1, 2012, interest rates on loans for over 7.4 million students will double. And for each year that Congress doesn’t act, students rack up an additional $1,000 in debt over the life of their loans.

Meanwhile, CNN reports the numbers somewhat differently:

If Congress does nothing, the cost to students borrowing the maximum $23,000 in subsidized loans is an extra $5,000 over a 10-year repayment period. The cost to the federal government to extend the lower interest rate is $5.8 billion, according to an analysis by the nonpartisan Congressional Budget Office.

So what's the big deal?  Heck, one year of the Buffett Rule would almost cover the $5.8 billion price tag.  Well, CNN also notes that "a big reason why House Republicans aren't inclined to go along with extending the rate" is that according to a Pew Research Center analysis, a college degree can mean an extra $650,000 over a 40-year career.  That extra $5,000 would be taken care of in 16 weeks.  Not much to ask over 40 years.
    On Tuesday, President Obama addressed some students in North Carolina.  According to Charlie Spiering at the Washington Examiner, he told them...

...that it was time for them "to be responsible" by "thinking bigger" than just themselves.
"We're here only because somebody somewhere felt responsibility not just for themselves, but they felt responsibility for something else," said Obama, reminding the students that their parents and grandparents ... made sacrifices for them.

So what exactly should these students be responsible for?  You would think at the very least their own debts at market interest rates.  The president seems to think this is too much to ask, even going so far as to urge a national whine-in on Twitter to tell Congress "#Don'tDoubleMyRate."
    The reality of what these young people will be responsible for whether they like it or not can be found at the Senate's Committee on the Budget website.  The Lifetime Share of the National Debt calculator reveals that the current lifetime share of the national debt for a 22-year old is $681,086.  There goes that extra $650,000 that the college degree earned.  And for what?  A chance to enter the 1%, or at least the middle class, that will bear an every increasing burden of paying the national debt?  The ultimate irony is that while the President is "reminding the students that their parents and grandparents made sacrifices for them," his fiscal recklessness is saddling those students, their children, and grandchildren with financial "sacrifices" the likes of which this country has never known.  Responsibility is a lesson best taught by example, and the President has shown himself not up to the task.

Originally published at Blogger News Network

The Cost of Freedom?

   It's official.  The debt limit of the USA is now $16.4 trillion.  That's $16,400,000,000,000.  It comes to $8,000,000 for every hour our country has been in existence.  But it didn't beginning in July 1776.  John Hancock and his compatriots didn't think they were signing loan papers that day in Philadelphia.  But 100 or so years ago, things began to change:

Graph created at http://www.usgovernmentdebt.us/

Now it's difficult to tell exactly where the blue appears on the chart, but it looks to be roughly 1910-1920 or so. Quick history quiz!  What Constitutional Amendment was ratified in 1913?  If you said the 16th, the amendment that authorized the income tax, you are right!  So, still think raising taxes is going to help reduce the national debt?


 (HT: Keith Myer) 

Nickel and Diming

   As we approach the 100th anniversary of the sinking of the Titanic, perhaps it's time to think about replacing "rearranging the deck chairs on the Titanic" with a modern equivalent, but nevertheless it came to mind when I read about the President's plan to save $3 billion over 10 years by combining six government agencies.  According to the Administration's own budget, total federal expenditures in 2012 will total $3.7 trillion.  In one year.  Even if expenditures were frozen for 10 years (which is about as likely as another old cliche about somewhere freezing over,) the total for the decade would be $37 trillion.    Savings of $3 billion on $37 trillion is the equivalent of a family earning $50,000 saving - are you ready for this? - $4.05.  Yes, that's four dollars and five cents.  I double checked.  President Obama has essentially proposed skipping a Starbucks latte once a year.
   To add insult to injury, the savings will in part be achieved by jobs cuts, but not immediately: "[T]he administration would [cut jobs] through attrition; that is, as people routinely leave their jobs over time."  In other words, unnecessary duplicative jobs will only be eliminated as people voluntarily leave them.  What kind of incentive is there to leave a job in which the workload is being shared by one or more other individuals who are apparently superfluous, particularly since public sector jobs routinely pay much better than comparable private sector positions?
   Some are characterizing this proposal by the President as a "power grab."  Nonsense.  It's more like the bully who takes your lunch money flipping a nickel back to you as he walks away.  And you're supposed to be grateful.

UPDATE:  A couple of other ways to look at this:

• $3 billion over 10 years is $300 million.  Since the US population is 307,000,000, it comes to $1 per person per year.  The national debt is currently $53,000 per person.
• Again, $3 billion over 10 years is $300 million/year.  The government currently spends $300 million every 42 minutes.

UPDATE:  I have now posted Part II of this series.  Not included is the President's blockbuster claim:  brand new "savings of $10 billion over 10 years"!  If you are keeping track, we're now skipping four lattes a year.