What does a $1.2 trillion budget deficit look like?
It would buy 4.8 billion Wiis. As a standard mortgage, it would cost $6.7 billion a month.
The US government’s budget deficit – its credit-card bill this year, if you will – could total a record $1.2 trillion, the Congressional Budget Office estimated last week. This raises the question: What’s the monthly payment?
If the sum were calculated as a traditional 30-year fixed-rate mortgage, Uncle Sam would have to write a monthly check for $6.7 billion. That would be enough to pay the mortgage on about 10 percent of the nation’s homes each month.
But if Uncle Sam had to finance the $1.2 trillion on a credit card – the way many small businesses do these days – the minimum monthly payment would be at least 2 percent of the balance, or about $24 billion a month. If the US Treasury had to pay the same interest rate as Joe the Borrower – a 14.9 percent annual percentage rate – it would take the government 79 months (6.6 years) to pay the money back – while still accruing an additional $686 billion in interest.
Of course, the government still carries a credit rating that allows it to pay considerably less interest than almost anyone else. Three-month US Treasury bills are yielding a historically low 0.30 percent rate while the 10-year note is at 2.48 percent.
However, some strapped borrowers only make minimum payments of about 2 percent of the original balance. It would take the taxpayers 50 years to pay off the deficit this way and they would rack up $1.94 trillion in additional interest, calculates Bill Hardkopf of LowCards.com, an online consumer service.
Given current interest-rate assumptions, the increasing deficit will cost an additional $18 billion in the first year. Because this money is added to the national debt, the Peter G. Peterson Foundation, which aims to increase public awareness of challenges facing the country, estimates the deficit would eventually cost $628 billion over 10 years.