For the longest time the federal government has been able to run up debts and postpone the burden of payments for immediate purchases of goods and services. Interest payments on public debts have stayed somewhere around $100 billion, or at least below $200 billion per year.
In 2009 the interest paid on federal public debt was $187 billion, about 8% of the total of $2,100 billion in tax money collected. That means around 8% of the taxes you are currently paying are going to interest payments for expenditures made in the past.
Recent estimates from the GPO predict a rather drastic change:
From now through 2015 the interest paid on the federal debt is estimated to rise to as high as $570 billion. In other words, it is estimated to triple within the next 5 years. This is up from 8% to then 27% of our current tax burden.
To put things in perspective: The last time this number was a third of what it is today was in 1983, 27 years ago!
So what used to take 27 years to get us to today’s levels, could now happen in as little as 5 years. If this is not explosive growth, then I don’t know what is.
By the way, the GPO estimates in that same budget that the federal government’s tax receipts will rise year by year over the next 5 years to reach an impressive $3,600 billion in 2015. If people trust such rosy numbers, it is understandable that the interest portion can still be sold as justifiable.
Where that tax money is supposed to come from is not really clear to me. I understand that politicians will say that exciting and fundamental economic growth will be the driver for this. I would like to submit that this is, as always, rather laughable.
I suggested some very broad and basic estimates for the years to come in terms of tax collections, and was then already closer to the actual numbers than the official estimates.
The president’s budget estimates tax receipts of $2.2 trillion, $2.4 trillion, $2.7 trillion, and $3 trillion for 2009, 2010, 2011, and 2012, respectively. These estimates are laughable. My projections for tax receipts, as I explained in The Coming US Tax Receipt Shortfall:
Federal tax receipts will fall to $2.25 trillion in 2009, to $2 trillion in 2010, to $1.75 trillion in 2011, and to $1.5 trillion in 2012.
Meanwhile there is no indication that government expenses will fall. Even with the current, now completely obsolete, budget estimates for government expenses, the Federal deficit would develop as follows:
- $850 billion for 2009
- $1 trillion for 2010
- $1.3 trillion for 2011
- $1.7 trillion for 2012
These are very optimistic figures. It wouldn’t be surprising if actual figures turned out to be around double or triple those numbers, unless a true change in policy were to occur.
Now that we have updated figures on coming expenses it’s time to update the deficit predictions:
- $1.65 trillion for 2009
- $1.6 trillion for 2010
- $1.95 trillion for 2011
- $2.2 trillion for 2012
Even if a fall in tax receipts were to flat out in 2012 and tax collections were to begin rising again, i still don’t see how collections should reach a number as high as $3,600 billion under current circumstances. I think the government could be happy if by then they were back to just below what they are collecting today by then!
This is all of course assuming that no drastic changes in the tax code occur, which is of course completely predictable:
If President Obama keeps spending like this, and really wants to cut the deficit in half by 2013, he will at one point be faced with no other choice but to raise taxes on all Americans, rich, middle class, and poor.
Actually, the rich will always find ways to not pay taxes, which leaves the two former groups as those who will be bearing the heaviest burden.
Yes, as sure as night follows day, the bills for decades of profligacy, corruption, wars and destruction, favoritism and coerced unionism, in other words for big government, are coming due. And those who will be paying the bills won’t be the people who enjoyed the benefits of and asked for all this spending, it will be you and your children, who were never and will never be asked.