Exponential functions can be a real bitch, even when the exponent is only slightly greater than 1. The chart below tells the story. From Tyler Durden at zerohedge.com:
Whoever wins the 2016 presidential election tomorrow night could be in for a rough 4 years in the White House courtesy of the gigantic debt burden amassed by Obama over the previous 8 years. While an accommodative monetary policy, including seemingly unlimited treasury buying by the Fed and foreign governments, has suppressed the budget impact of Obama’s ballooning federal debt balance, as Ed Yardeni told Bloomberg, “one shudders to think what would happen if rates actually ever did go back to normal.”
“We’ve really got ourselves into a pickle here,” said Edward Yardeni, president of Yardeni Research Inc. in New York, who’s been following the bond market since the 1970s. “All these years we’ve been kicking the can down the road, and suddenly we’re seeing a brick wall.”
“There’s been so much borrowing going on that’s been enabled by extremely low interest rates, one shudders to think what would happen if rates actually ever did go back to normal,” Yardeni said. “The impact on the interest expense would be significant, and could really bring deficit concerns back to the fore.”
As a report published by the Congressional Budget Office today points out, nearly 60% of the federal budget is spent on entitlements and interest payments on public debt. While the public debt balance has increased every single year of Obama’s Presidency, declining rates have largely offset the budget impact.
Outlays for the three largest entitlement programs—Social Security, Medicare, and Medicaid—rose by $29 billion (or 3 percent), $27 billion (or 5 percent), and $19 billion (or 5 percent), respectively. Spending for Medicaid grew largely because of new enrollees added through expansions of coverage authorized by the Affordable Care Act. With that growth, Medicaid spending has risen by almost 40 percent in the past three years. Combined outlays for the three programs were equal to 48 percent of federal spending and 10.0 percent of GDP in 2016, the highest shares ever recorded.
Outlays for net interest on the public debt increased by $23 billion (or 9 percent), largely because of higher inflation in 2016. (Each month, to account for the effects of inflation, the Treasury adjusts the principal of Treasury inflation-protected securities, using the change in the consumer price index for all urban consumers that was recorded two months earlier.) Outlays also increased because debt and average interest rates were higher in fiscal year 2016 than in fiscal year 2015.
That said, rates will have to “normalize” at some point and the CBO expects that the “winner” of the 2016 presidential election will be the beneficiary of that normalization.
If the CBO’s forecast is accurate, then outlays for the interest payments on public debt alone could rise over $300 billion over the next 8 years which would be more than a 50% increase in the current budget deficit.
To continue reading: 4 Year Proposition? – Next President Has To Contend With Obama’s Massive Debt Burden At “Epic Turning Point”
We already know the dem’s normal approach: war.
Reblogged this on The Grey Enigma.