Concern grows over rising U.S. debt
Government notes, bills and bonds will be on sale as Washington tries to finance its spending habits. Senior business correspondent Bob Moon talks with Kai Ryssdal about increasing worries over what the government owes and how much that debt costs.
Calculating debt (iStockPhoto)
More on Fed. Budget/Govt. Spending
TEXT OF INTERVIEW
Kai Ryssdal: The Treasury Department put hat firmly in hand today. The government went back to the marketplace looking for buyers -- $118 billion worth of Treasury notes, bills and bonds will be on sale this week. Washington is trying to finance its spending habits. Or our spending habits, truth be told. As annual deficits move into the trillions of dollars, there is increasing concern about how much the government owes and about how much that debt costs. And yet, Washington keeps on borrowing. When we get stories like these, we turn to our senior business correspondent Bob Moon.
BOB MOON: Hello, Kai.
Ryssdal: One word question here, Bob: Why?
MOON: Well, two-word response: It depends. We still keep pouring a lot of money on trying to smother the financial crisis fire, if you will. OK. So a lot of this stimulus spending, a lot of it is giving money to the banks so they can lend. We've heard that time and time again. But there are a lot of groups who say that a big part of this spending is stuff that isn't necessary. It's just Washington addicted to its usual ways. And leaders of both political parties, and really on all sides of the political spectrum, say we really do need to get a handle on this.
Ryssdal: What happens, though, if we don't?
MOON: Well, there's concern that just servicing this debt, and that is just the interest charges on all of this debt, could amount to as much as $700 billion just in interest charges by 2019, which isn't too far away. I spoke to J.D. Foster. He's a budget forecasting expert at the Heritage Foundation. And he sees a real crisis looming if the government doesn't back off it soon.
J.D. FOSTER: When financial markets realize that the federal government has no intent on changing course, then the markets will say, "whoa" just as any lender would do to a borrower, when you realize the borrower intends to be grossly irresponsible. When that happens the lender says no more. And in this case the markets will express that by a very large increase in interest rates across the board.
MOON: Let me ask you this interest rate question, though. Because we talked about this on the broadcast on Friday. Investors have so much spare cash, that they are plowing money into short-term Treasury bills, right? They were sending the yield negative on that, paying the government to hold their money on Friday. How does that play into this entire debt equation that the government has?
MOON: Yeah, so if they're so worried about it, why would they be plowing all their money into these Treasury notes? Well, there is a school of thought that banks right now, because we're coming to the end of the year, are trying to put their money in places where it's a lot safer in less risky areas, also a lot more liquid that they can get to it quickly should something go wrong. And so they want liquid cash, and T-bills are the best place to do that.
Ryssdal: Back to the spending part of this for a second, Bob. You hear a lot of people saying, wait a minute, the economy is still really tender, what we need is more government spending, not worries about interest rate on government debt as a percentage of GDP and all these kinds of things. What do you say to that?
MOON: Well, as I mentioned, there are people out there who say, look, just put the brakes on this right now, that it's not helping, it's not helping the economy. That it's damaging the economy. But there are others, fair enough, who say we need to at least have this stimulus money in the system, we need to keep spending in that way. And even there critics say, OK, if you need the stimulus spending at least separate that out from other things, such as health-care reform, for example. Things that they say aren't necessary to improve the economy at this point.
Ryssdal: Yeah, the point being that we're just commingling all this borrowing that we're doing, and nobody really knows what's going on.
MOON: That everybody is just spending for the sake of spending.
Ryssdal: And in the meanwhile, Treasury Department says these bond sales are going to continue.
MOON: That's right, Treasury just served notice on the bond market earlier this month that we can expect another year of bond sales at about these levels, which would mean as much as $2 trillion sold in the coming year. The government going even $2 trillion more into debt. In the past year, we've sold $1.9 trillion. We are just going deeper and deeper into debt every single day.
Ryssdal: Marketplace's senior business correspondent, Bob Moon. Thank you, Bob.
MOON: Thanks, Kai.
Comments
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From Armada, MI, 11/25/2009
The dollar held up quite well last year because all nations were printing money at roughly the same rate. This prevented rampant deflation without any of the major participants currency rising or falling significantly. But America continues to print while everyone else has cut back. This is a recipe for disaster unless the other nations follow suit.
From San Antonio, TX, 11/24/2009
The fundamental reason why we feel good about borrowing money is we just evaporated trillions of dollars with the housing bust. If we print a bunch of new money maybe no one will notice that the old stuff is gone and we won't suffer rampant deflation? However the end result is we still experience deflation, just with the dollar's exchange rate and not within our own little world.
From Milan, MI, 11/24/2009
Unlike most of the comments so far, I'm pleased to see you consult an economist who doesn't think government spending is the best solution to all problems despite overwhelming evidence to the contrary. If anything, the commentator understated the problem; for instance, the Democratic health care bills all use various tricks to try to hide their true cost and make them look fiscally responsible, but can't even fully succeed at that. I think it's perfectly reasonable for the country's creditors to look askance at a new administration who thinks that the previous decade's emergency, wartime, deficits are a "good start" for permanent and peacetime spending.
From Madison, WI, 11/23/2009
Moon was really wearing his politics on his sleeve for this one.
First he goes through the entire budget doomsday scenario without any hint of actual evidence for his claims, waiving off the opinions of plenty of top economists without ever addressing their arguments, and attacking the stimulus with that meaningless "Washington addicted to their usual ways" bromide.
Then, just to push the incoherence that extra mile, he whines about health care reform. Last I checked, CBO was saying the senate bill lowers the deficit, but I guess it still spends money on keeping poor people alive. Horror of Horrors!
From Anchorage, AK, 11/23/2009
While I generally enjoy listening to Marketplace I can't help but notice a creeping reliance on conservative think tanks for narrative during news segments such as this one. The moment Bob Moon sourced the Heritage Foundation for perspective on U.S. debt,I intuitively knew that somehow the story would come full circle back to, you guessed it, health reform.
This isn't journalism, it's opinion masquerading as journalism. If Marketplace insists on relying on agenda driven think tanks for context during it's show then at least offer equal air time to The Brookings Institution or The Center for American Progress.
From Ames, IA, 11/23/2009
People complain for years about your reliance on the American Enterprise Institute, and now you throw the Heritage Foundation at us? Really? The Heritage Foundation? With no mention of their heavily partisan bent? Really? Sigh.
On to let my local station know why I am still withholding my donation.
From Coupeville, WA, 11/23/2009
In listening to the concerns about the US debt and the budget situation I can't understand why people keep harping on cutting spending in everything except the one thing that is really ruining this country. Why don't people include the vast amount of money spent in waging the wars in which we are involved. If we just stopped spending on those wars wouldn't all our debt, or most of it, be manageable? Why don't your reporters include that in your analyses?
From Mount Airy, MD, 11/23/2009
Bing! Looks like Bob Moon's search engine already is Murdoch-exclusive.
From Newport News, VA, 11/23/2009
Please see Paul Krugman's column: http://tinyurl.com/y8tq3mj
From Scotts Valley, CA, 11/23/2009
Asking questions to Bob Moon, who in turn asks the Heritage Foundation for talking points, is like having Bill O'Reilly ask Sean Hannity for his opinion. And anytime you resort to "there are people out there..." - that's not news, it's Rumsfeldian propaganda and doesn't belong on your program.
From Ventura, CA, 11/23/2009
How do you have a three-minute segment on why the government is borrowing a lot of money *without ever mentioning* the highest unemployment rate since the Depression? No, that's not the whole reason, but it sure is a huge part of it.
If the government were borrowing two trillion dollars to build spaceships to repel the recent Martian invasion, wouldn't you mention the Martian invasion? Sheez, guys--you need to get out of the office more.
From Gilroy, CA, 11/23/2009
Oh, come on. You couldn't even find time to say that Nobel prize winner Paul Krugman thinks this U.S. debt boogeyman is nonsense. Really? Not just 10 seconds. Just "you hear a lot of people saying ...". Really? I turned off the program after this. You just sound too much like Fox and make me sound too much like Weekend Update on SNL.
From merrimack, NH, 11/23/2009
Nine years ago, the concern was over the cost of paying down the debt: the demand for secure Federal bonds would drive down interest rates as people fought for an ever smaller pool of safe debt, secure from default.
That and the high taxes required to pay off the debt would result in a poorly growing economy that failed to create new jobs.
Why aren't people rejoicing at the abundance of Federal bonds offered and the low tax revenues that cause them?
Aren't the people at Heritage a bunch of flip floppers, first calling for tax cuts to increase the debt and now pointing with alarm at all the debt their tax cuts have created?
I believe they also predicted in the early 90s that the Clinton tax hikes would kill growth, will predicting in 2000 that tax cuts would increase growth and increase tax revenue. Right? Are they the best people to ask for opinions on Federal fiscal matters?
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