Thursday, May 14, 2009

President Obama: Dire Consequences of Budget Deficits

White House photo: the President at Rancho Rio, NM town hall meeting today

Cross posted at The Next Right

President Obama warned today that deficit spending will bring soaring interest rates as borrowing becomes more and more difficult. Obama noted the harsh economic impact of just paying the interest on the debt incurred (let alone paying off the debt itself). Bloomberg reports:

“‘We can’t keep on just borrowing from China,’ Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. ‘We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.’

“Holders of U.S. debt will eventually ‘get tired’ of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. ‘It will have a dampening effect on our economy.’”

Unfortunately the warning comes over a month late. The President’s budget request was passed in early April on almost a straight party vote with no House Republicans voting for it and only three Senate Republicans in favor. The Congressional Budget Office estimated that the Obama budget will double the national debt in ten years.