WNYC's Bob Hennelly is an award-winning investigative journalist. While at WNYC he has reported on a wide gamut of major public policy questions ranging from immigration and homeland security to power outages and utility mergers.
Stucknation: Our Debt Service Time Bomb
Monday, February 21, 2011 - 12:00 AM
When President Obama released his 2012 budget proposal, he spoke of hard choices and investments. What he left out were the real jaw-dropping numbers contained in an obscure Department of the Treasury Report from the Office of Debt Management that was released two weeks earlier.
The 24-page document in charts and graphs dispassionately lays out the explosion in costs associated with just servicing the nation's rolling multi-trillion dollar deficit.
Right now, thanks to relatively low interest rates, servicing the nation's deficit costs $185 billion a year to finance. By 2015, those finance charges will explode to an annual cost of $554 billion dollars, a little more than the Department of Defense proposed budget for this year.
By 2018, the finance charges on Uncle Sam's credit card are projected to hit close to $800 billion. This year alone, the $185 billion for the current debt service is more than twice the entire appropriation for the US Department of Education for next year.
The hundreds of billions of dollars in debt service that must be paid will squeeze out other priorities for years to come. This is the lingering legacy of fighting two wars while cutting taxes for the wealthy.
Equally disconcerting is a Pentagon report released last month that was commissioned by Vermont Independent Senator Bernie Sanders. "The Report to Congress on Contracting Fraud" disclosed that dozens of contractors who had been tagged with civil fraud penalties in excess of a million dollars each between 2007 and 2009 were still paid $270 billion dollars by the Pentagon.
There was also the almost $700 million dollars paid out over the same period to thirty contractors, despite the fact that they had actually been criminally convicted for defrauding the government.
And now House Republicans and President Obama will both strike a blow for austerity and take it all out on the domestic spending side of the federal budget, zeroing out heating assistance for the nation's poor and other programs for low-income Americans.
Meanwhile, the nation's states and local governments struggle with their own huge debt service payments that annually top over $110 billion dollars. From Main Street to State Street, past borrowing forecloses options for the future.
States are dealing with the costs for caring for the tens of millions of their residents who now must rely on Medicaid for their health coverage. The federal supplemental aid aimed to help with the surge in Medicaid demand accelerated by the Great Recession is exhausted, but the need remains. Help for the states that boosters of President Obama's Affordable Health Care Act say will make a difference is still three years away.
To get a feel for the actual misery index in the real economy, you can't just look at the top line national average from ten thousand feet for something like say, unemployment.
Drill down to real places with a physical address. Late last month, the Bureau of Labor Statistics reported 20 states recorded an increase in the number of unemployed, while 15 states had no change. Meanwhile 15 states and the District of Columbia registered fewer unemployed. (No wonder the White House and Congress think we are in "recovery.")
What's really cause for alarm are the statistics for the long-term unemployed. In 2007, the numbers of persons jobless for more than a year was 645,000. By the middle of last year it was 4.5 million people, a record high since the government started tracking that number in 1948. They are now a third of the 13 million unemployed.
This phony recovery is really hitting the nation's young especially hard. Last summer was a lost season for tens of millions of young people looking for a job. Less than half of the job seekers ages 16 to 24 could find one.
Every idle American diminshes the prospects for the nation, while we spend more and more on finance charges for our past excesses.