Obama: Debt Problem? What Debt Problem?

Now that President Obama has clarified his intention to kick the U.S. entitlement crisis down the road to a future administration, economists are assessing just what that will mean for America’s future.

In June 2010, the chairman of the Joint Chiefs of Staff, Adm. Mike Mullen, called the national debt “our biggest national security threat.”  The President’s own Simpson-Bowles deficit commission warned, “America cannot be great if we go broke.”

That provoked Associated Press reporter Ben Feller to ask the president in February 2011, “Where is your leadership on that issue?”  But the budget he proposed to the Senate that year was rejected unanimously:  97-0.

Many observers naturally assumed Obama would address entitlements after winning re-election.  But instead, he told the nation the Medicare, Medicaid, and Social Security “do not sap our initiative, they strengthen us.”

By most estimates the national debt, if left unattended, will be about 20 percent greater the day Obama leaves Washington than it is today.  Already it is a staggering $16.4 trillion. And because hordes of baby boomers get closer to retirement age with each passing day, the fiscal chasm continues to grow exponentially.

The Congressional Budget Office currently estimates that the national debt will reach 90 percent of the GDP about four years after the president leaves office.  Some predict that will happen much sooner, given the added entitlement spending in Obamacare.

By 2025, according to the president’s own debt commission, total government revenue will only be sufficient to pay for four items:  Medicare, Medicaid, Social Security, and interest on the national debt.  Every other federal activity – block grants, transportation spending, the military, homeland security, you name it – will have to be financed with borrowed money.  Higher interest rates will reduce productivity by an estimated 15 percent.

Debt at this high a level has deeply problematic implications for the economy and families.  It means much slower growth, higher interest rates, and higher inflation.

By 2028, just paying the interest on U.S. debt will cost over $1 trillion per year.  That year, by the way, just happens to be the year the president will turn 67 – currently the official retirement age. By then, the national debt won’t be Barack Obama’s problem.  He’ll be retired.