Worries Rise on the Size of U.S. Debt

By GRAHAM BOWLEY and JACK HEALY
Published: May 3, 2009



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.

Last week, the yield on 10-year Treasury notes rose to its highest level since November, briefly touching 3.17 percent, a sign that investors are demanding larger returns on the masses of United States debt being issued to finance an economic recovery.

While that is still low by historical standards — it averaged about 5.7 percent in the late 1990s, as deficits turned to surpluses under President Bill Clinton — investors are starting to wonder whether the United States is headed for a new era of rising market interest rates as the government borrows, borrows and borrows some more.

Already, in the first six months of this fiscal year, the federal deficit is running at $956.8 billion, or nearly one seventh of gross domestic product — levels not seen since World War II, according to Wrightson ICAP, a research firm.

Debt held by the public is projected by the Congressional Budget Office to rise from 41 percent of gross domestic product in 2008 to 51 percent in 2009 and to a peak of around 54 percent in 2011 before declining again in the following years. For all of 2009, the administration probably needs to borrow about $2 trillion.

The rising tab has prompted warnings from the Treasury that the Congressionally mandated debt ceiling of $12.1 trillion will most likely be breached in the second half of this year.

Last week, the Treasury Borrowing Advisory Committee, a group of industry officials that advises the Treasury on its financing needs, warned about the consequences of higher deficits at a time when tax revenues were “collapsing” by 14 percent in the first half of the fiscal year.

“Given the outlook for the economy, the cost of restoring a smoothly functioning financial system and the pending entitlement obligations to retiring baby boomers,” a report from the committee said, “the fiscal outlook is one of rapidly increasing debt in the years ahead.”

While the real long-term interest rate will not rise immediately, the committee concluded, “such a fiscal path could force real rates notably higher at some point in the future.”

In some ways, ballooning deficits should not matter. Deficits are a useful way for governments to use public spending to stimulate the economy when private demand is weak. This works as long as a country closes its deficit and pays back its borrowings after its economy starts to recover.

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.

http://www.nytimes.com/2009/05/04/business/economy/04debt.html?_r=1&ref=politics

I wish Pres. Obama hadn't inherited over almost $2 trillion in debt from Pres. Bush, but he's doing what he can to clean up the messes
started by previous presidents as best he can. It will take more time than 105 days, however. Of course, Republicans love seizing on
memes like the one expressed by the title of this OP, just as some DUers love sharing them here.

What I don't accept, however, is the complicity of the Democrats - the centrists, the Blue Dogs, the ConservaDems - who anteed up for capitalism and tore down the protective measures paving the way for this mess.

Yes, the DLC, of whom President Clinton was a past chairman of, really bought into GOP free market mumbo-jumbo.
To hear it now, they still do (Exhibit A: Evan Bayh, also a former DLC chairman). Let's see if they obstruct all of Pres.
Obama's attempts to reform the tax system as much as they blocked his idea to help people avoid foreclosure via
judges' restructuring.

Explain it in an adult fashion, please.

I did say that President Obama inherited a nearly $2 trillion debt from BushCo, did I not?

But the Wall Street subprime/hedge fund meltdown that led to the current economic crisis could never have
happened without the deregulating effects of the 1999 Financial Services Modernization Act, which in turn
has led to the debt incurred by TARP and the stimulus plan (possibly with more to follow next year), all of
which has led to jittery markets and "concern" about the deficit.

back when Bush stripped the surplus and turned it into a deficit?

...crickets...

The hypocrites will overlook the illegal, unnecessary lie of a war in the Middle East.

The hypocrites will overlook the Republican policies that are mostly responsible for this mess.

The hypocrites will put on their tunnel vision glasses and blame it all on the current administration, who after less than 4 months in office has created this huge mess!

They have forgotten that this mess started a year before Bush left office. That would be BUSH THE REPUBLICAN.

They will ignore the fact that Bush didn't inherit a recession when he took office, it actually began AFTER HE TOOK OFFICE.

These are the same folks who say 9/11 was Clinton's fault, even though he'd been out of office for OVER 7 MONTHS when it happened.

People this stupid would lose their bodily functions if they lost .01% of what's left of their brain function.

But the huge deficit is making plenty of markets jittery. Even my uber liberal economist brother in Europe is concerned about our capacity to reduce the deficit.

Uh huh... :eyes:

But the huge deficit is making plenty of markets jittery.

So what else is new? They should be watching their step. Didn't stop Wall Street from having its best month in six years this March, tho'.

Even my uber liberal economist brother in Europe is concerned about our capacity to reduce the deficit.

I'll just bet he is. It's only now that he's "concerned" eh? So, I guess he was confident "about our capacity to reduce the deficit"
106 days ago, four months ago, a year ago, two years ago?

seeing it defended on this site...but once again, after teleprompter we shouldn't be surprised.

No, we are not surprised. Bitter is as bitter does. But we always get the last laugh 'cause Obama Is 44. :fistbump:

of cash to avoid paying taxes on it will make a big dent in the deficit. It's about time these loopholes were closed up.

I think we're all a bit concerned over how to pay down the deficit, to say the least. :(

That loophole should have been closed years ago.

because, according to him, this "gives preferential treatment to foreign companies at the expense of U.S.-based companies."

If companies or individuals are using offshore accounts specifically for the purpose of evading their legal tax requirement, how is that different from stealing from the rest of us? What happens to someone who doesn't pay taxes in significant amounts without offshore havens? Isn't that like... not legal?

I guess the difference is that the offshore finagling is "legal" because of the loopholes that are exploited give them that workaround.

Amazing. The icing on this ugly cake is the very loud, insistent cries in protest that imposing higher taxes for the wealthy is SO unfair (meanwhile, they're busy working their loopholes and skirt paying those taxes they feel so disabused by. Sheesh).

fuck you.

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

How many 100s of billions/trillions did we go into the hole for Wall Street's bailout?

running up our debt by 5 trillion dollars, because they wanted their big expensive wars and massive tax cuts for the rich and for the corporations. Like Wall Street. But now, they are so very, very concerned. Oh, so concerned. They should all be on their knees right now thanking their good fortune that they aren't being paraded through the streets of washington in stocks while the newly-unemployed throw tomatos at them. Instead, they lecture us while Washington throws trillions of dollars at them in a supply-side orgy that Reagan would only have dreamed of.

It makes me fucking crazy.

'recouping' 210 BILLION over 10 years from corporate tax cheats and has stated some of that 210 BILLION will go toward reducing the debt, I hope those that have only recently developed their 'concern' over the debt will be equally as public in applauding the President on his initiative but I am cynical enough to doubt that will happen.

And btw, utilizing a tax loophole doesn't make you a tax cheat. When you do not pay taxes that are legally owed, then you are a tax cheat.

I didn't say they broke the law, I say they are tax cheats:

From President Obama's speech today:

"It's a loophole that lets subsidiaries of some of our largest companies tell the IRS that they're paying taxes abroad, tell foreign governments that they're paying taxes elsewhere -- and avoid paying taxes anywhere."

http://www.boston.com/news/politics/politicalintelligence/2009/05/obama_to_unveil_1.html


The taxes are owed to one country or the other yet they pay nothing to either = tax cheats to me.

Used to avoid paying more taxes than necessary. When you use a loophole, you're not a tax cheat. When you do not pay your payroll taxes you are a tax cheat.

which is what companies did as per President Obama's statement. It was legal but it was cheating. Now those loopholes will be closed so they cannot cheat without committing a crime and that is how it should be.

Good grief, if it is LEGAL it is not CHEATING.

You don't seem to understand the difference between cheating and doing something illegal, it seems the tax cheats don't either:


Cheating

Cheating is an act of lying, deception, fraud, trickery, imposture, or imposition. Cheating characteristically is employed to create an unfair advantage, usually in one's own interest, and often at the expense of others.<1> Cheating implies the breaking of rules. The term "cheating" is less applicable to the breaking of laws, as illegal activities are referred to by specific legal terminology such as fraud or corruption. Cheating is a primordial economic act: getting more for less, often used when referring to marital infidelity. A person who is guilty of cheating is generally referred to as a cheat (Br. English), or a cheater (Am. English).


http://en.wikipedia.org/wiki/Cheating#cite_note-0

Illegal

Illegal, or unlawful, is used to describe something that is prohibited or not authorized by law or, more generally, by rules specific to a particular situation (such as a game).


http://www.ask.com/bar?q=illegal&page=1&qsrc=2417&ab=0&u=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FIllegal

and that is part of the plan.

Further, when looking at this debt, what we must keep in mind....
The Government did what he had to do since Obama has been in office,
and.....Barack Obama's Legacy to our Youth for any remainding debat has to be kept in perspective,
as they will get for this....

1. Affordable and Efficient Health Care.
2. A Better Educational System and the ability to compete with other nations.
3. The opportunity for them all to go to college without graduating owing massive debt.
4. Alternate sources of energy.
5. A Cleaner Environment with the prospect of reducing Global Warming.
6. A scientific Approach to Science.
7. A Sound Economic Foundation.
8. A Fairer minded Supreme Court.
9. Less Nukes in the world.
10. A restored reputation abroad.
11. A viable and secured Social Security System.

Those are your answers when you hear Republicans whine about Pres. Obama leaving
our next Generation a giant deficit.

those are meaningful advantages and advances and are so much more than what the Republican
created deficits left; just a bankrupt nation and nothing more.

We'll just have to wait and see if all those goals can be accomplished.

as most of these items are in process of happening as we speak! :eyes:

The citizens consumers of the country are expected to re-start the buying-orgy, to aid in the financial recovery, but many are just plain tapped out..and hopelessly in debt.

They would welcome a 10% debt ratio:(

I'm sure it has nothing to do with this poster's long anti-Obama posting history. :eyes:

That is an interesting take

Do you have anything more to add

if were going to have jack as far as resources or productivity just a short while down the road then it is past the time to invest in the groundwork. We should have been dealing with infrastructure, energy, education, and health care instead of blowing trillions on Iraq, tax cuts, and keeping the economy on life support.

Those that change the rules and reaped the harvest can be sucked dry to pay down the debt for all I care but leaving the next generations with nothing to make their way in this world and the rest of us to toil through the decline is a non-starter. We'll spend the global economy into (and we can, look at the damage we just did) the toilet if need be first.

If you put Iraq and Afghanistan on budget. Seventy-five percent of our tax dollars are spent on the military industrial complex. No wonder our country is falling apart.