ATTENTION - DEFICIT DISORDER

[wadestock]

I finally got my 1040 booklet, and found that interest on the debt for 2004 would be 7%, I started to wonder....why so low? Interest payments on the debt for 2004 went up, right?

Can someone please tell me why we are paying LESS interest on the debt each year from 2000 through 2003? And with % of the tax dollar going towards interest payments actually going DOWN? I had heard this year there would be an INCREASE in the % of the tax dollar going towards interest on the debt....perhaps to over 10%. Not so evidently, with the rate actually falling to 7% ...AND...with total interest payment creeping back UP.

Just as a sanity check, we all know that REVENUES ARE NOT GOING UP on average, despite what many have been led to believe. Therefore, we know that there are no revenues being used to pay the interest on the debt, right?

WHAT’S GOING ON HERE? CREATIVE ACCOUNTING?????

Background information....
Interest payments on the national debt and what you have paid out of your tax dollar to finance the debt....

Year Net Interest Paid % of your tax dollar

1994 296 billion 14%
1995 332 billion 15%
1996 345 Billion 15%
1997 356 Billion 15%
1998 364 Billion 14%
1999 354 Billion 12%
2000 362 Billion 11%
2001 359 Billion 10%
2002 333 Billion 8%
2003 318 Billion 8%
2004 322 Billion 7%
(all above from 1040 booklets, but check 2004 figure, that's the only one I'm going by memory cause I didn't bring the booklet to work)


Now witness the ever rising TOTAL debt (all figures as of end of FY, 31 Sept except “present” and 2004 which is 31 Dec 04)....

Year Total Debt
Present 7,623,133,257,119 (and rising fast)
2004 7,596,144,000,000
2003 6,872,676,000,000
2002 6,282,528,000,000
2001 5,815,983,000,000
(These last 3 years from http://www.publicdebt.treas.gov/opd/opd.htm#history)

All the rest are from http://www.publicdebt.treas.gov/opd/opdhisto4.htm
2000 5,674,178,209,886.86
1999 5,656,270,901,615.43
1998 5,526,193,008,897.62
1997 5,413,146,011,397.34
1996 5,224,810,939,135.73
1995 4,973,982,900,709.39
1994 4,692,749,910,013.32
1993 4,411,488,883,139.38
1992 4,064,620,655,521.66
1991 3,665,303,351,697.03
1990 3,233,313,451,777.25
1989 2,857,430,960,187.32
1988 2,602,337,712,041.16
1987 2,350,276,890,953.00
1986 2,125,302,616,658.42
1985 1,945,941,616,459.88
1984 1,662,966,000,000.00
1983 1,410,702,000,000.00
1982 1,197,073,000,000.00
1981 1,028,729,000,000.00
1980 930,210,000,000.00
1979 845,116,000,000.00
1978 789,207,000,000.00
1977 718,943,000,000.00
1976 653,544,000,000.00
1975 576,649,000,000.00
1974 492,665,000,000.00
1973 469,898,039,554.70
1972 449,298,066,119.00
1971 424,130,961,959.95
1970 389,158,403,690.26
1969 368,225,581,254.41
1968 358,028,625,002.91
1967 344,663,009,745.18
1966 329,319,249,366.68
1965 320,904,110,042.04
1964 317,940,472,718.38

[PROGRESSIVE1]

1. .............................

[Old and In the Way]

2. Because they don't give a shit?

Looks like a nice way to avoid dealing with the problem.....let future generations worry about it. In the meantime, cut taxes and increase defense spending!

That one year jump (2003-2004) just about equals the entire debt in 1977. These limited government Republicans are really principled, aren;y they?

[wadestock]

4. I smell a rat, but I can't find anything to substantiate....

what's going on.

The reason interest payments on the total debt went down in Clinton/Gore was mostly because of 2 primary things:

1. Increase taxes, including gas tax and shifting tax burden a bit back to the upper eschelon (who can easily affort to pay it). This modest shift yielded incredible extra revenues simply because more and more money has been accumulating at the top of the heap.
2. Better economy meant more revenues coming in.

BUT NOW....WTF is going ?%$#@!

The total debt is increasing, even in comparison to GNP....AND....on average there's no way to show that increased revenues are somehow causing the total debt to go down....OR...that interest payments are somehow going to be less. Interest payments have actually gone up this year. Although I have wondered the influence of prevailing interest rates on bringing interest payments down, even that doesn't explain why the rate this year would be 7%.

My theory....they have found some creative accounting to come up with a way to pay less in interest payments....something which then would have the effect of INCREASING the total national debt!!

Please help on this explanation...I have found nothing in innumerable web searches so far.

[Old and In the Way]

6. I think you've explained it pretty well.

They've lightened up on the interest payments....what's 8% of $7TT? $560BB. That allows them to get their wars and taxbreaks without being fiscally responsible. Apparently, deficits don't matter any more. Oh wait, they will when a Democrat is elected.

[unblock]

3. interest RATES have been insanely low the last few years

with greenspan trying desperately to stave off a meltdown and also to get shrub re-elected.

with rates rising now AND with a deficit, the absolute dollars spent on interest is and will be skyrocketing for several years, and will become a noticeably larger percentage of gdp.

[wadestock]

5. How long can the Fed Gov finance the debt at really low interest rates?

I checked this http://www.infoplease.com/ipa/A0908373.html
Federal funds, effective rate
1980 1985 1990 1995 2000 2001 2002
13.35% 8.10% 8.10% 5.83% 6.24% 3.88% 1.67

OK, so assume theory #1 is wrong...this is a result of unusually low interest rates.

Can you answer this question....
How can the Federal Government finance (roll over) this debt in the long term at extraordinary low interest rates?


BTW here's the figures showing the net increases for each year...revealing the extraordinary increases each year in debt under this administration compared to previous years

Year Total Debt Change from Previous Figure
Present 7,623,133,257,119 26,989,257,119
2004 7,596,144,000,000 723,468,000,000
2003 6,872,676,000,000 590,148,000,000
2002 6,282,528,000,000 466,545,000,000
2001 5,815,983,000,000 141,804,790,113

2000 5,674,178,209,886.86 17,907,308,272
1999 5,656,270,901,615.43 130,077,892,717
1998 5,526,193,008,897.62 113,046,997,501
1997 5,413,146,011,397.34 188,335,072,261
1996 5,224,810,939,135.73 250,828,038,427
1995 4,973,982,900,709.39 281,232,990,696
1994 4,692,749,910,013.32 281,261,026,874
1993 4,411,488,883,139.38 346,868,227,617
1992 4,064,620,655,521.66 399,317,303,825
1991 3,665,303,351,697.03 431,989,899,920
1990 3,233,313,451,777.25

I'm checking on what appears to be a strange figure for 2004, but even so...there is no question the current admin is NOT controlling the total increase in debt....and I wonder if it is actually increasing faster than necessary because of a clever means to avoid interest payments.

[unblock]

7. another thing the treasury did to lower interest rates:

a few years back they started going down the short end of the curve. they stopped issuing new 30 year bonds altogether, and started refinancing debt with short paper.

the short end of the curve (e.g., 2-year and 5-year notes) have lower (almost) always have lower interest rates than longer (10-year notes and 30-year bonds) because the the interest rate isn't locked in for as long (there are brief periods when the curve is inverted, but this is the exception, not the rule).

by doing this, the interest payments are lower, but, of course, the lower interest rates are not locked in for very long. the 2-year and 5-year debt soon matures and needs to be replaced with fresh debt at the (entirely predictably higher) prevailing interest rates.

in short, they took a short-term benefit of lower interest payment in exchange for the need to refinance more later(e.g., this year), at high interest rates.

[wadestock]

8. What are the pros and cons of low interest rates?

Yes the up side is low payments on the debt.

But the down side of low interest rates are that we'll have a huge problem financing this debt at low rates into the future, right? Who is going to eventually buy trillions of dollars of loans at low rates like this?

Are we thus inevitably forced to raise the rate to make these more competitive? Now just a few percentage points and that interest on the debt could become 1 Trillion dollars per year!!!

Sounds to me like Bush is taking us to the proverbial rock and hard place scenario.