“Just Do the Math,” says US Senator Orrin Hatch (R-Utah), but he doesn’t mean the math that most of us learned in school, he means something more like faith-based math, which inevitably “proves” that every dime of taxes or government spending drives America one step closer to the Islamo-Communist Hell of Barack Obama and his satanic minions!
This is voodoo economics, as George H.W. Bush described it way back in 1980 (before he sold his soul to Ronald Reagan), but it’s a paragon of scientific accuracy compared to the nauseating absurdity of pretending that Barack Obama isn’t pushing us all in exactly the same direction as the Republicans.
The Republicans, Speaker Boehner or Majority Leader Cantor did not call for Social Security cuts in the budget deal. The President of the United States called for that.
–US Representative John Conyers (D-Michigan)
But for the Republican faithful that probably looks like the Hand of God emerging from the back of Orrin’s head and “demonstrating” yet again that government is the problem!
Just do the (faith-based) math!
But what if we ask somebody who can actually add and subtract about the Republican debt-hysteria which Obama continually endorses?
Amid all the debt hysteria, it’s worth taking a look at the actual arithmetic here – because what this arithmetic says is that the size of the deficit in the next year or two hardly matters for the US fiscal position – and in fact the size over the next decade is barely significant.
Start with interest rates. What matters for debt sustainability is the real interest rate, since what matters is keeping real debt, not nominal debt, from growing. (World War II debt never got paid off, it just eroded in real terms to the point where it was trivial). As of yesterday, the US government could lock in 30-year bonds at a real interest rate of 1.25%. That means that a trillion dollars in extra debt would mean $12.5 billion a year in additional real interest payments.
Meanwhile, the CBO estimates potential real GDP in 2021 at about $18 trillion in 2005 dollars, or around $19 trillion in 2011 dollars.
Put these together, and they say that an extra trillion in borrowing adds something like 0.07% of GDP in future debt service costs.