With a lame-duck session of Congress set for the weeks after the Nov. 6 election, members of Congress face the task of taking steps to reduce the deficit before inevitable interest rate hikes push the nation into a debt crisis with profound, long-lasting consequences.
Former President Bill Clinton gave a reminder of the task ahead as he renewed his warning Sunday about a surge in interest rates and a potential debt crisis.
“If interest rates were the same today as they were when I was president, the payment on the debt, that is, what the taxpayers have to pay every year, the financial debt (payments) would go from $250 billion to $650 billion a year,” Clinton warned on CBS’s Face the Nation Sunday.
Congress and President Barack Obama, he said, “can’t let that happen” – so they must strike a deal on reducing deficits and debt…
Steve Bell, senior director of economic policy at the Bipartisan Policy Center in Washington and former staff director of the Senate Budget Committee, said Monday, “President Clinton is right.” Bell said the average rate on the ten-year Treasury note over the past three decades has been about 4.75 percent. The Bipartisan Policy Center estimates that if that interest rate were prevailing, “we would spend more money on the interest payment on the debt than we would for all of our national defense.”
In the fiscal year which ends next week, the government will have spent about $220 billion on interest payments and $670 billion on defense, according to the Congressional Budget Office.
He added, “Interest rates are going to rise from here; the question is whether they’re going to rise quickly or whether they’re going to rise gradually. History teaches us that they can rise very quickly once the economy starts getting into full gear – around 3 percent real GDP growth.”
Bell said when European economies sort out their debt and fiscal problems, “the unusual flight to safety, which has really kept American interest rates so low – because people put their money here rather than risk it anywhere else – that will slow down and then cease.”