Perdue Video Highlights the Cost of Servicing the National Debt

Continuing his efforts to draw attention to the nation’s growing debt, and the budgeting problems that he believes are a major driver of the debt, Georgia Senator David Perdue released the third video, which explains how expected rising interest rates on the national debt will cause the country’s debt service to rise dramatically.

In the video, Senator Perdue points out that should interest rates revert to their 50 year average, the nation would be paying $1 trillion in dept service annually, more than twice what we currently pay for national defense. You can read a transcript of the video below the fold.

The first two videos in this series on the debt focused on dysfunction in Washington and Congress’s broken budget process.

In the first video, we talked about the fact that Washington is doing many things we cannot afford and how the national debt crisis is interlocked with this global security crisis.

In the second video, we discussed how the broken budget process is not serving to control the growth of the debt. The budget process, as we discussed, has only worked four times in the last 40 years.

Both of these issues have led us to a point where we cannot afford to support our country’s national priorities—including the very defense of our country.

It’s pretty clear we are already well past the tipping point in this debt crisis and in this video, we will discuss how it could get much worse before it gets better.

Washington has been borrowing large sums of money at low interest rates for years. This should have been a wakeup call, setting off alarms across the country.

But most politicians, especially President Obama, do not seem overly concerned.

The Federal Reserve artificially held interest rates low for seven years due to weak economic growth, market volatility, and stagnant wages—until last December when interest rates, for the first time in seven years, were raised just a quarter of a point.

While this rate hike sounds minimal, it amounted to $50 billion of new interest every single year.

Folks, that is only a quarter of a point. Imagine what happens if interest rates climb even higher—and they will.

In a recent speech, Federal Reserve Chairwoman Janet Yellen said, ‘Given the risks to the outlook, I consider it appropriate for the committee to proceed cautiously in adjusting policy.’

Additionally, Atlanta Federal Reserve Chairman Dennis Lockhart has said while he does not expect four interest rate increases this year, he does think, ‘there is scope for three rate hikes’ in 2016.

If they occur, these interest rate increases will increase our interest payments significantly. This will either reduce the amount of money we have to spend on discretionary items—like the military, education, infrastructure projects, and foreign aid – or it will increase our growing federal debt.

As you can see from this chart, interest rates historically have fluctuated quite a bit over the last 50 years. We saw interest rates climb in the late 1970s to the high teens. As a matter of fact, in 1981 interest rates nearly hit 20 percent.

Now imagine, if interest rates return to their 50-year average of just over 5 percent, we would be paying almost $1 trillion dollars of interest on the current federal debt. That’s more than twice of what our country now spends on national defense.

This is just unmanageable. Congress must deal with this crisis right now.

As a matter of fact, Congressional Budget Office projections include a dramatic increase in interest rates over just the next few years.

Equally as concerning, the Congressional Budget Office has projected the national debt will grow to $30 trillion over the next 10 years unless something is done right now.

One thing’s for certain, if Congress keeps spending and interest rates continue to go up, as expected, a lot less of our government’s budget will go toward Americans’ priorities and the national defense—and our debt will rise at an even more rapid rate.

Because of the size of the debt, the interest we pay on the debt is critical. We’ve been fortunate over the past few years to have artificially low interest rates. As rates rise, interest expense will go up dramatically and put pressure on other spending priorities.

In this video series we are highlighting the two crises, how they’re interconnected, and what must be done to dig our way out of this crisis. We simply have to change the budget process, eliminate redundant agencies, grow the economy, save Social Security and Medicare, and reduce our health care costs.

The longer we wait, the more difficult it will be to change trajectory of our growing national debt, which threatens our ability to defend our country and our very way of life.

Just as we cannot afford all of the things we are doing financially, we simply cannot afford to wait any longer to solve this problem.”

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SaltycrackerThe Dixie CheetomongerScottNAtlantaIndypendantJack Fitz Recent comment authors
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Jack Fitz
Jack Fitz

The David Purdue Scientific Method:

Step 1. Identify the problem

Step 2. State that need to fix the problem

Step 3. Provide more colorful language ABOUT the problem

Step 4. Avoid specific solutions at all costs.

Step 5. Rinse. Repeat.

Indypendant
Indypendant

I own Treasury notes.

I also own Certificates of Deposit at several financial institutions.

Maybe Mr. Perdue doesn’t understand that average, hardworking Americans who have scrimped and saved for years are going to be collecting that interest.

Now ask yourself, is Perdue looking out for your best interests, or the interests of powerful lobbies?

ScottNAtlanta
ScottNAtlanta

Lets take that a step further. Does he know what he is talking about…period. No. He is a dimwit and we sent him to DC. Hopefully we will think better of it next time around

The Dixie Cheetomonger
The Dixie Cheetomonger

Most Americans have not been able to save money, or at least not much. But when wages haven’t increased since the 90s and everything ender has, it can be a bit of a strain for the average American to save money.

ScottNAtlanta
ScottNAtlanta

Notice he isnt even brave enough to allow YouTube comments. Whats he afraid of…the truth?

Saltycracker
Saltycracker

The artificially low interest rates are not only bad but the transfer has not gone to benefit the nation in many ways. One is that left wing economists of the past promoted deficient spending on public projects, buildings, research……it worked then. Obamas will complete 8 years with no year better than 3% growth, the first for a President. In the early stages of the recession he toyed with projects but in hindsight according to Fortune 3/1 the country’s infrastructure continues to decline. As a percentage of GDP public infrastructure spending is at a two decade low. States look to the… Read more »

ScottNAtlanta
ScottNAtlanta

I’m not exactly sure what point you are trying to make, but the failure for the last 6 years, falls mainly on the backs of the republican majority and dimwits and tea party know nothings like Perdue. They have no idea how our monetary system works. It is BASED on debt. Tight fiscal policy (Congress unwilling to spend) is the villain, not Obama.