Deeper and Deeper
EDITORIAL, USA
Interest Payments -– NYTimes on the Web, October 5, 2006
There is fresh evidence, if any more
were needed, that excessive borrowing during the Bush years will make the nation
poorer.
For most of the past five and a half years, interest rates have been low,
allowing the government to borrow more and more — to cut taxes while fighting
two expensive wars — without having to shoulder higher interest payments.
That’s over now. For the first time during President Bush’s tenure, the
government’s interest bill is expected to rise in 2006, from $184 billion in
2005 to $220 billion this year, up nearly 20 percent. That increase — $36
billion — makes interest the fastest-growing component of federal spending, and
continued brisk growth is likely. According to projections by Congress’s
budget office, the interest bill will grow to $249 billion in 2007, and $270
billion in 2008.
All of that is money the government won’t have available to spend on other needs
and priorities. And much of it won’t even be recycled back into the United
States economy. That’s because borrowing from foreign countries has
exploded during the Bush years. In 2005, the government paid about $77
billion in interest to foreign creditors in China, Japan and elsewhere.
And that’s not the worst of it. While foreign investors were putting up
most of the $1.5 trillion the federal government has borrowed since 2001, they
were also snapping up hundreds of billions of dollars in private sector
securities, transactions that have been a big source of the easy money that
allowed Americans to borrow heavily against their homes.
The result, as The Wall Street Journal reported last week, is that for the first
time in at least 90 years, the United States is now paying noticeably more to
foreign creditors than it receives from its investments abroad. That is a
momentous shift. It means that a growing share of America’s future
collective income will flow abroad, leading to a lower standard of living in the
United States than would otherwise have been achieved. Americans deserve
better than this financial mess.
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