Still more debt
To the Editor:
Supporters of President Obama were encouraged this month to learn that he and his administration added only $1.1 trillion to the national debt last year. Their media devotees reported that his Administration had successfully reduced the burden of government on the economy. That, unfortunately, is a delusion. The government simply transferred about $350 billion of cost from its books to a $350 billion loss of income to the public. The losers are the people who save and invest. Their pension plans, 401k's, money market funds, and personal investments lost income that they justly had expected to receive. In effect this was a new tax disguised as a benefit.
You and I can't set the interest rate on the funds we borrow for buying cars and houses. The government can. The Federal Reserve has declared that rate nearly to 0 percent. Apparently that let the Administration borrow more money at the new low rates to get funds to retire older, higher cost, obligations.
The result is striking and creates the illusion of progress toward debt reduction. In 2005 the federal government paid $352 billion of interest on debt of $7.9 trillion. Last year it reported spending only $8 billion more interest on the doubled debt of $15.8 trillion. At the 2005 interest rate the government would have reported a deficit of about $1.45 trillion, not $1.1 trillion. That's bigger than even the worst of the Bush deficits.
So, by financial engineering, the administration made itself appear admirably effective but that appearance is paid for by others in the economy who save, invest and create jobs. The economic burden of government is not reduced.
St. Johnsbury, Vt.