How bad is our debt and what are its consequences? Midknight Review has some thoughts.

Our question is this: is this push for health care reform more about the collection of taxes than it is about anything else? You read, you decide.

Bloomberg has an excellent news article about our debt, our debt service and our obscene lust for ore and more spending.

In the world of international finance, a nation does not have to pay down its debt BUT it does have to pay the interest due on its debt. We call this "debt service."** Understand that debt service is a fixed amount determined by how much a nation owes multiplied by the predetermined interest rate. Unless that rate decreases or is increased, the pay via formula is fixed. What is critical in determining our credit rating, currently AAA, is a somewhat volatile percentage figure. The line of demarcation between AAA and AA rating is the percentage of revenue we spend on interest payment -- currently 14%. In other words, when our interest payments exceed 14% of what we take in during the course of any particular year in terms of revenues, our credit rating moves down from AAA to AA and our the international interest rate for our debt increases.

It looks as though this might happen within a year. There is an unintended consequence to this downward move that goes beyond an increased percentage required to pay on the debt -- it is the fact that borrowing money becomes much more difficult. A double "A" rating is a statement to lenders that we have not acted as responsibly as we should have. The interest rate goes up because we are deemed to be "high risk" as a borrower.

It is accepted that Obama spending will add more than a $1 trillion to our national debt each year for the next ten years -- not including the expense of health care which will begin 5 years from now.

Understand that Obama and the Dems will collect taxes prescribed by the health care reform for five years BEFORE the health care plan goes into effect -- taxes collect without any off-setting expenses for 5 years. And what will the Dems do with that money? Some of it will be spent on setting up the bureaucracies necessary to the function of the health care take over but most of it will go into the general fund to hold down the advancement of the national debt -- to stave off the crossing of that 14% barrier. Midknight Review is saying that the Obama Administration is trying to artificially hold down debt advancement until they accomplish as much of their agenda as possible before they lose their Congressional majorities.

Some will reject this premise as being a little too conspiratorial. We would respond by arguing that this is not conspiratorial at all, rather a recognition of how well thought out is the Democrat political campaign policies. One thing for certain, what you see in Democrat Party politics is not what you get. We must never lose sight of that fact -- jds.

** we add that "debt service" is actually two functions - our interest payment and our principle payment, if any.
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