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Written by Charles Kadlec
- Forbes
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Tuesday, March 22, 2011
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The Federal government's fiscal emergency is likely to begin in earnest this summer.
The trigger will not be entitlement spending. Rather, the driver of the fiscal crisis will be an uncontrolled $800 billion explosion in annual interest payments on the federal debt to potentially $1 trillion per year over the next five years. Such a super-charged ramp up in spending will more than offset even the most ambitious ideas now being discussed to reduce the Federal budget deficit over the next 10 years.
This conclusion is based on an extraordinary, but virtually unreported, testimony elicited by Congressman David Schweikert from financier and philanthropist Lewis E. Lehrman during Congressman Ron Paul's hearings last week on Monetary Policy and Rising Prices. (Watch here.)
Schweikert noted his concern that the weighted average maturity of the Federal debt (WAM) was "somewhat dangerously short." Lehrman pointed out that the average maturity of the debt is approximately four years and made the following startling point:
"Were the level of debt service payments to rise to close to market rates which are typical of full employment, the level of debt service payments would rise by an order of magnitude and consume a part of the federal budget which today is almost unthinkable and could only be four or five years away."
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