Obama Says U.S. Long-Term Debt Load ‘Unsustainable’ - Then why did you just triple it?

By Roger Runningen and Hans Nichols
from Bloomberg.com

President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“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.”

Earlier this week, the Obama administration revised its own budget estimates and raised the projected deficit for this year to a record $1.84 trillion, up 5 percent from the February estimate. The revision for the 2010 fiscal year estimated the deficit at $1.26 trillion, up 7.4 percent from the February figure. The White House Office of Management and Budget also projected next year’s budget will end up at $3.59 trillion, compared with the $3.55 trillion it estimated previously.

Two weeks ago, the president proposed $17 billion in budget cuts, with plans to eliminate or reduce 121 federal programs. Republicans ridiculed the amount, saying that it represented one-half of 1 percent of the entire budget. They noted that Obama is seeking an $81 billion increase in other spending.

‘Beginning to Turn’

“We’ve got a long way to go before we put this recession behind us,” Obama said. “But we do know that the gears of our economy, our economic engine, are slowly beginning to turn.”

To contact the reporters on this story: Roger Runningen in Albuquerque at rrunningen@bloomberg.net; Hans Nichols in Washington at =1871 or hnichols2@bloomberg.net
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