US severely exposed if rates rise: Erskine Bowles

CNBC ^ | 02/03/2014 | Matthew Belvedere

[Rusty0604]

The United States spends about $230 billion a year in finance payments to creditors

[PGR88]

A massive, progressive, socialist, nanny-state government like we have now can not exist without the Federal Reserve and its ability to monetize US Government debt, and manipulate interest rates.

[kabar]

The Fed now holds $4.3 trillion of our debt, making it the largest holder of our $17 trillion debt.

[2banana]

To put this in perspective.

Thanks to the US Government’s INSANE spending and deficits levels...

A rise in interest rates will mean we will spend more money on servicing the debt than on national defense.

Military Spending - 19% of the Federal Budget ($670 Billion) per year

Entitlement Spending - 58% of the Federal Budget ($1.65 Trillion) per year.

In 2010 (last year figures are available) - the deficit is 62% if GDP - a figure not seen in 60 years.

Where does it end? Look at Greece and Argentina today.

http://en.wikipedia.org/wiki/US_deficit

http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2011.png

[nascarnation]

I give the guy some credit.
One of the VERY FEW in office or media willing to talk about it.
Most are pretending it can’t ever happen.

[ex-snook]

Simpson-Bowles doesn’t address Medicare/Medicaid, the biggest drivers of our debt.:

Spending on Americans is not the problem. It's money on the rest of the world with constant wars, nation building and trade deficits.

[pierrem15]

Yup: The Fed will continue to buy T-Bills, and in effect, never ask that the money be re-paid.

Think of the enormous power having access to trillions of freshly printed money gives to the Fed, the banks that own it, and their favorite political cronies who can continue to spend like there's no tomorrow.

The Us is quickly becoming a corrupt 'populist' oligarchy a la Argentina-- and soon, we'll even speak Spanish!

[pierrem15]

Nonsense— the greatest spending is on Social Security, Medicare and Medicaid, plus other entitlements— these dwarf all other spending.

[tired&retired]

Let’s see:

$17,258,471,483,278.83 in debt X 10% interest rate = $1,725,471,483,278 in interest per year

Total actual revenue from all US income taxes collected in 2013 fiscal year was $1,589,900,000,000. ($1,316.4 B Individual Taxes and $273.5 B Corporate Taxes)

Any one see a problem in the future? Remember what rates Carter left us with!

[ex-snook]

You haven’t deducted all Americans have paid into SS & Medicare. Spending in other countries is a total waste.

[tired&retired]

I found a really good analysis at this site: http://www.usgovernmentrevenue.com/federal_budget_actual

[tired&retired]

Don't you just love extrapolation of garbage....???

[kabar]

Spending on Americans is not the problem. It's money on the rest of the world with constant wars, nation building and trade deficits.

Two thirds of our almost $4 trillion budget is spent on the entitlement programs, food stamps, etc, It is on automatic pilot and will consume the entire budget if these programs are not reformed.

[Wyatt's Torch]

Interest expense as a percent of GDP:

[ex-snook]

This doesn’t include a deduction for what Americans paid into SS and Medicare. As Reagan would say ‘we paid for this mic’.

[pierrem15]

We haven't paid nearly as much as the benefits cost, and most of the money we put in is immediately loaned to the federal government to support current spending: that's how we've been snookered. Most of the money we have paid has already been spent.

If Social Security were a real insurance policy based on actuarial data and not politician's promises, we'd probably have to pay 25% of our income (or more) into it to make up for missing contributions from those already enrolled.

In Singapore, which has a real forced retirement savings plan, the young pay 40% of income into it.

[ex-snook]

How’s Singapore doing?

[Night Hides Not]

What’s 5% of $17,000,000,000,000?

About $150 billion less than $20,000,000,000,000, which is where we'll be in Jan 2017.

BTW, 5% of $20T is:

[kabar]

SS and Medicare are pay as you go programs, i.e., today's workers pay for today's retirees. SS has been running in the red since 2010 and Medicare since 2008.

This graph shows that the average man and woman (average defined in the study as average income over their working lives and living to the average life expectancy) who start receiving benefits in 2010 get over 3 times more in benefits than they pay in to the system! Of importance, the study accounts for inflation by calculating all past taxes and future payments in 2010 dollars to provide an accurate comparison.

If the notion that Medicare recipients are simply "getting back what they paid in" is false then where is the money coming from? Simply, the excess received is being borrowed from younger generations and the cost is more than we can bear.

[Rusty0604]

“Loan Rates in Argentina Reach 65% Annually; Is 65% a Good Rate?”
Read more at http://globaleconomicanalysis.blogspot.com/2014/02/loan-rate-in-argentina-hits-65-annually.html#k2UAh12KoPCt2Tsq.99

[LibLieSlayer]

Rules and laws no longer apply to the communists.