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4 Year Proposition? – Next President Has To Contend With Obama’s Massive Debt Burden At “Epic Turning Point”

November 7, 2016

4 Year Proposition? – Next President Has To Contend With Obama’s Massive Debt Burden At “Epic Turning Point”

Whoever wins the 2016 presidential election tomorrow night could be in for a rough 4 years in the White House courtesy of the gigantic debt burden amassed by Obama over the previous 8 years.  While an accommodative monetary policy, including seemingly unlimited treasury buying by the Fed and foreign governments, has suppressed the budget impact of Obama’s ballooning federal debt balance, as Ed Yardeni told Bloomberg, “one shudders to think what would happen if rates actually ever did go back to normal.”
“We’ve really got ourselves into a pickle here,” said Edward Yardeni, president of Yardeni Research Inc. in New York, who’s been following the bond market since the 1970s. “All these years we’ve been kicking the can down the road, and suddenly we’re seeing a brick wall.”

“There’s been so much borrowing going on that’s been enabled by extremely low interest rates, one shudders to think what would happen if rates actually ever did go back to normal,” Yardeni said. “The impact on the interest expense would be significant, and could really bring deficit concerns back to the fore.”

US Debt
As a report published by the Congressional Budget Office today points out, nearly 60% of the federal budget is spent on entitlements and interest payments on public debt.  While the public debt balance has increased every single year of Obama’s Presidency, declining rates have largely offset the budget impact.
Outlays for the three largest entitlement programs—Social Security, Medicare, and Medicaid—rose by $29 billion (or 3 percent), $27 billion (or 5 percent), and $19 billion (or 5 percent), respectively. Spending for Medicaid grew largely because of new enrollees added through expansions of coverage authorized by the Affordable Care Act. With that growth, Medicaid spending has risen by almost 40 percent in the past three years.

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