The nation’s checkbook: $561 trillion short?

Last week, the green eyeshades at Moody’s warned Spain that their stellar AAA credit ranking was at risk, citing the country’s difficulty in meeting deficit reduction targets. Spain’s spooked creditors responded by demanding higher interest rates to hold the country’s bonds.

These interest rates are bad news, and not just because Spain’s minimum monthly payment on their national credit card just got a bit bigger. It also means the Spanish could soon see their mortgage payments and credit card bills rise (click here to find out how).

Unfortunately, a new report from the Congressional Budget Office (CBO) shows that the United States is on track for a similar outcome.

Moody’s has drawn a “line in the sand” for advanced countries with large debt loads; interest payments on their debt can’t exceed 18 percent of all the money they’re bringing in through taxes. You cross the line, and you risk a downgrade – it’s as simple as that.

CBO projects that the United States will cross that line in eight years.

Unfortunately, if we don’t get our fiscal house in order, that first bond downgrade won’t be our last.  As the graph of CBO data above shows, over the next 70 years our public debt is projected to skyrocket to more than 800 percent of the country’s economic output – that’s $561 trillion (you can find out how big a trillion is here).

Continued debt accumulation in the coming decades means higher taxes, and higher interest rates that drive up the cost for all of us to borrow money.  Unless you expect to check out from planet Earth within the next ten years, you should be frightened. We are on course not only to destroy your family’s finances, but also to destroy our country’s.

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So, what lies behind this astronomical growth in the national debt? Entitlement spending. Reining it in is the only solution. Unfortunately, the CBO says that Congress’ new health care law won’t fix this problem; many economists believe that it will make the problem worse.

As one chair of the President’s deficit commission recently made clear, defeating the debt will require difficult and substantial entitlement spending cuts. Unless we want to end up on the wrong end of a Moody’s report, Congress must act soon.

Read the original story at Defeat the Debt