Monday, January 17, 2011

Simple math

Jack made a good point last week over at USNIBlog,
Something’s gotta give. In 2009, the U.S. spent $187 billion (more than China’s defense budget) paying off interest on government debt.
But let's focus on China specifically,

China holds $846.7 billion in treasuries as of July, approximately 6.22 percent of the total debt, which means it probably collected more than $12.6 billion in interest payments last year alone. In the great scheme of things, that may not seem like much. But with an annual defense budget of $77.95 billion, those interest payments currently constitute about 16 percent of China’s military spending.

Alarmingly, China’s military spending was up 7.5 percent from the year prior. That’s about how much interest owed on the debt grew from 2009 to 2010, from $187 billion to $203 billion, an 8.5 percent increase. The more taxpayers chip in via interest payments, the larger China’s military grows.

Consider this: By 2020, OMB estimates net interest owed on the debt will total $840 billion. If China keeps a consistent share of the debt, its annual interest paid will more than double to $52.2 billion every year. That’s more than two-thirds of China’s current military budget. So, the rising cost of interest owed on the debt is helping to directly fund a dramatic expansion of the second largest military in the world. That’s not even counting the revenue China generates every year because of the trade deficit.

As we all know - those payments will be made by your children and grandchildren, and you in your dotage.

So, next family dinner - play this and tell the family - "Enjoy it everyone - you're paying for it!"

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