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And as of today, China is a net seller of Treasury debt. If we can't fund our debts in the bond market, the Federal Reserve will be forced to monetize our deficits by buying Treasury bonds. If that happens, inflation will soar and the price of gold will double or triple almost overnight.
The bigger problem, over the long term, is simply debt service. Right now, the federal government takes in roughly $1 trillion in incometaxes and a much smaller amount of money in other fees, duties, etc. (The government takes in another $1 trillion from Social Security and Medicare taxes, but it spends more currently on these programs than it takes in. So as a result, this revenue can't factor into our analysis of debt service.) At the end of 2009, the federal government had $11.8 trillion in total outstanding debt. That's the official number.
Likewise, officially, the interest we paid last year made up 11% of the government's revenues – but that measure included all of the social insurance premiums as tax. More importantly, the current budget doesn't include a number of highly significant obligations that are actually the government's responsibility, but are held "off balance sheet."
... By the end of OBAMA!'s first presidency (2013), I believe the U.S. will owe roughly: $17.8 trillion in federal debt, $2 trillion in GSE debt/guarantees, $500 billion in FDIC obligations, and $500 billion in FHA obligations. My only big assumption is $1.5 trillion in additional deficits each year, which is what the president's budget also predicts.