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Departments National Issues One quarter of every tax dollar you pay! $7 Trillion national debt driving interest expense to record highs December 31, 2003 the United States National Debt reached the $7 trillion mark. President Bush didn’t mention it in his State of the Union speech and the Democrats didn’t bring it up in their response. But the U.S. Treasury’s Bureau of the Public Debt keeps a running tab and lately it’s running like hell. $7 trillion was hit just 22 months after the debt passed $6 trillion February 26, 2002. It was the first time in U.S. history that trillion dollar milestones were crossed in back-to-back calendar years. By comparison, the trail of arrears from $5 trillion on February 26, 1996 to $6 trillion took six years. But what does it mean? To a public confounded by conflicting facts and competing philosophies, what’s a trillion or two either way? The answer is interesting. While the debt itself is a 13-digit string beyond the math of mere mortals, the interest on the debt is quite another story. Like the finance charge on your credit card, it’s the right-off-the-top part of the bill before the principal is touched. Last year, the interest was $322 billion. That’s $322 billion that didn’t get spent on job training, schools, medical research, conservation or health care for the neediest Americans. In fact, it was the lion’s share of an “on-budget” $468 billion deficit that was the largest by far in U.S. history. (The on-budget deficit is the annual shortfall before the Social Security Trust Fund, currently running a surplus, is figured into the equation. Politicians prefer the “net deficit” - $304 billion last year - because it sounds better. And big media tends to obey. But the on-budget figure is the true number because that is the amount by which the National Debt actually rises.) Besides using bogus deficit numbers to describe each year’s added debt, politicians like to muddy the picture by comparing the total debt to the “gross domestic product,” which is the presumed value of all goods produced and services delivered in the country in a year. Last year, for example, the government calculated GDP at $10 trillion to conclude that the national debt was at a historically tolerable level of about two thirds the GDP’s value. But the debt-as-percent-of-GDP equation is a useless smokescreen for several reasons. First, there is no way to compute gross domestic product with absolute certainty. Second, the government can - and has - screwed with the formula to make the GDP estimate higher. Third, though GDP is one measure of economic vitality, it is outside the debt’s mathematical context. GDP represents a single year’s quantity while the debt represents every year of the republic put together. It’s like dividing apples by oranges to see how many grapefruits you get, which is just plain bananas! A clearer understanding of the debt’s annual impact on American life is gained by dividing every cent paid in interest by all the revenue feds rake in per year. Apples divided by apples. The resulting percentage is what I like to call the Budget Interest Factor, or BIF. This formula is more statistically relevant because revenue, not GDP, is a verifiable measure of America’s economic might - and interest payments impact revenue directly. (Note: Fiscal years begin three months before calendar years) Last year’s revenues, according to recent White House figures were $1.75 trillion. Divide $318,148,529,151.51 in interest by $1.75 trillion and you get a budget interest factor of 18.1 percent. In other words, 18 cents of every dollar we paid in taxes went straight to interest. How does this rate historically? Not too bad actually. In the last two Reagan budgets, fiscal ’88 and ’89 the BIF averaged 24 percent. Then came Bush. His four budgets all had BIFs over 25 percent including the 1991 budget which “BIFfed out” at 27.1 percent, a modern record. The Clinton era saw BIFs drop sharply from 24 percent to a modern low of 17.9 percent in 2000. Since then, the budget interest factor has remained in the 18 percent range - but don’t relax just yet. A record $115 billion in interest was paid in the first quarter of fiscal 2004. Should this pace continue throughout the year, the annual finance charge will hit $460 billion, far more than the $318 billion Congress originally hoped for. Divide $460 billion by $1.8 trillion in anticipated revenues and the BIF rockets back up to 25 percent. Can the nation handle another era of quarter-per-tax-dollar interest? As it is, the Congressional Budget Office anticipates annual interest payments to climb past $400 billion by 2006 and $500 billion by 2008. And remember, politicians like to put the best possible spin on things. Even if their rosy - and unprecedented - scenario of $200 billion average annual revenue growth during the next three years comes to pass, it still means at least 25 percent of revenue to interest right into the next decade. Meanwhile, the anti-Bush Daily Mislead claims the President plans a $50 billion November surprise to fund the war should he win reelection. This “emergency” appropriation, like the two before it, would go straight to the debt, further bloating interest payments. With military madness, moon colonies, men on Mars and more tax cuts planned, can BIFs of 30, 35, even 40 percent be looming? Bush II seems bent on beating his dad’s 1991 record. We owe it to ourselves to change course. For more information visit www.publicdebt.treas.gov Christopher Bifani is an artist, writer and board member of The Free Press. |
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