4 Year Proposition? - Next President Has To Contend With Obama's Massive Debt Burden At "Epic Turning Point"

Tyler Durden's picture

Whoever wins the 2016 presidential election tomorrow night could be in for a rough 4 years in the White House courtesy of the gigantic debt burden amassed by Obama over the previous 8 years.  While an accommodative monetary policy, including seemingly unlimited treasury buying by the Fed and foreign governments, has suppressed the budget impact of Obama's ballooning federal debt balance, as Ed Yardeni told Bloomberg, "one shudders to think what would happen if rates actually ever did go back to normal.”

“We’ve really got ourselves into a pickle here,” said Edward Yardeni, president of Yardeni Research Inc. in New York, who’s been following the bond market since the 1970s. “All these years we’ve been kicking the can down the road, and suddenly we’re seeing a brick wall.”


“There’s been so much borrowing going on that’s been enabled by extremely low interest rates, one shudders to think what would happen if rates actually ever did go back to normal,” Yardeni said. “The impact on the interest expense would be significant, and could really bring deficit concerns back to the fore.”

US Debt


As a report published by the Congressional Budget Office today points out, nearly 60% of the federal budget is spent on entitlements and interest payments on public debt.  While the public debt balance has increased every single year of Obama's Presidency, declining rates have largely offset the budget impact.

Outlays for the three largest entitlement programs—Social Security, Medicare, and Medicaid—rose by $29 billion (or 3 percent), $27 billion (or 5 percent), and $19 billion (or 5 percent), respectively. Spending for Medicaid grew largely because of new enrollees added through expansions of coverage authorized by the Affordable Care Act. With that growth, Medicaid spending has risen by almost 40 percent in the past three years. Combined outlays for the three programs were equal to 48 percent of federal spending and 10.0 percent of GDP in 2016, the highest shares ever recorded.


Outlays for net interest on the public debt increased by $23 billion (or 9 percent), largely because of higher inflation in 2016. (Each month, to account for the effects of inflation, the Treasury adjusts the principal of Treasury inflation-protected securities, using the change in the consumer price index for all urban consumers that was recorded two months earlier.) Outlays also increased because debt and average interest rates were higher in fiscal year 2016 than in fiscal year 2015.



That said, rates will have to "normalize" at some point and the CBO expects that the "winner" of the 2016 presidential election will be the beneficiary of that normalization. 

US Debt


If the CBO's forecast is accurate, then outlays for the interest payments on public debt alone could rise over $300 billion over the next 8 years which would be more than a 50% increase in the current budget deficit.



And while headwinds are already baked into the federal budget from ballooning debt and entitlement spending, both Clinton and Trump have promised new expenditures for infrastructure projects and tax cuts.

“The Treasury has kind of gotten a free lunch over the last several years,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in New York, and a former researcher at the Richmond Fed. “Deficits had been artificially suppressed by the nature of monetary policy. Now you have structural issues with spending on entitlements, and a policy impetus that seems to be moving toward fiscal stimulus.”


While there’s no guarantee that either major candidate will be able to get their proposals through Congress, economists predict the potential shift toward looser fiscal policy will expand the debt burden.


Proposals from Democratic nominee Clinton include a $275 billion infrastructure plan that she intends to pay for through corporate tax-law changes. She’s also suggested tax increases for the wealthy. The plans would inflate the debt by $200 billion over a decade, according to analysis from the non-partisan Committee for a Responsible Federal Budget.


Trump, the Republican candidate, has made pledges including cutting taxes and spending as much as $500 billion on infrastructure. The proposals would boost the debt by $5.3 trillion, the Committee for a Responsible Federal Budget estimates.


The deteriorating backdrop for the world’s biggest bond market risks spoiling the plans of Tuesday’s winner, whether it’s Hillary Clinton or Donald Trump. Both have promised measures to foster growth and create jobs. The prospect of the three-decade bull market in bonds approaching a turning point has implications for everything the candidates want to tackle, from infrastructure spending to national security to tax cuts.

With bond and equity markets bubbling up all over the world and accomodative Central Banking policies growing a little long in the tooth, there is a very real possibility that the next president will be blamed when Obama's great "recovery" is unwound...which could very well mean that tomorrow's "winner" is looking at a 4-year proposition.

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drink or die's picture

Time to bring back the trillion dollar coin idea.

MANvsMACHINE's picture

Why stop there?  Let's hear it for the quadrillion dollar coin!

greenskeeper carl's picture

One good thing that will come out of Clinton stealing this election- when this shitshow finally collapses under its own weight, the right people will be sitting in the seats of power to take the blame this time around. These deep state fuckers deserve to take the blame and feel the heat of the torches and pitchforks.

weburke's picture

Liar yardeni..  reserve currency means you MUST go into debt. it is part of the function. they are preppig us to take away reserve to bancrupt what remains of the us. the bankers in switzerland and england, the damn ond killing families, own the banks. ruin all others lives.

Donnie Duvanie's picture

Can you make Tea out of trillion dollar coins? I'd like to drink some of it.

Red Raspberry's picture

As long as it has a zinc core right?

algol_dog's picture

Trillions of debt in monopoly money. Who cares? Debt doesn't mastter when you own the printer ....

JRobby's picture

Rates will not rise.

QE to infinity starts next week.

GreatUncle's picture

Reckon it is more along the lines ...

You can't contract the economy destroying the very few jobs you have without serious unrest from the population.

You can't stay the same because in a Keynsian ever expanding system the same is a contraction.

SO YEP YOU CTRL-P to pretend the economy is expanding so you can service the debt for now at least.

Problem is that the CTRL-P is getting weaker because when you print it is being used to support the bad debt ... instantly it becomes more bad debt blown away never to be good debt again and the bad debt grew.

The best shit show you could get was in 2008 and to bust the bad debt then ... deferred ... now you are trillions more in bad debt and the same around the world.

Eventually you have to torch that bad debt. You cannot just do a little and stop neither, the bad $ tries to jump to escape the flames and that is the contagion of vaporising debts once it starts.


Tallest Skil's picture

Annul the foreign debt, burn the Federal Reserve to the ground, reissue new United States Notes, backed by silver, and end all welfare programs created since the 1930s.

That solves it.

Dark Daze's picture
Dark Daze (not verified) Tallest Skil Nov 7, 2016 9:04 PM

You would get war for that.

King Tut's picture
King Tut (not verified) Dark Daze Nov 7, 2016 9:32 PM

So what?

Stuck on Zero's picture

Why doesn't the Fed simply buy all the debt and write it off?

1777's picture

If you 'write off the debt' what happens to the ones who lent the money?

It doesn't work! That why our creditors are beginning to back off.

Too much debt is a killer no country ever escaped from!

Al Huxley's picture

Why would they do that?  Right now you're the collateral (you and the rest of the country).  They're more likely to demand payment and take ownership of you and the rest of the country in a gigantic bankruptcy proceeding...

seek's picture

Because that's printing money. 20T of it.

Would you hold your savings in dollars if you knew it was going to be diluted massive? No. Neither would anyone else.

This is how you get hyperinflation.

Stuck on Zero's picture

Well. I fooled all you guys. What I suggested is what the Fed is doing. When you pay 0.5% interest and inflation is 5% you're buying the debt and writing it off.

sinbad2's picture

Well it has been buying most of it, who do you think buys the US treasury bonds?

Stan Smith's picture

This + whatever times.

The shit storm that's coming will dwarf most of what any of us have seen.

And yes, Barry O... you did build that.

Blankenstein's picture

Looks like you were REAL irresponsible and unpatriotic Obozo

"2008 then-senator Obama said that "whipping out the credit card from China, and payable by our children was irresponsible, and UNPATRIOTIC"



sinbad2's picture

The shit storm has been building since LBJ. When LBJ sold US gold reserves and sent the US into debt the seeds were sown.

NEOSERF's picture

Perhaps you haven't been watching Japan and Europe along with China but when we won't even let Venezuela or Greece default, the US is good for another 15 years until our interest payments are about 50% of income

Al Huxley's picture

Clinton's gonna have her hands full looting the public purse, selling American troops and trading state secrets for donations to the Clinton Foundation.  I don't see how she'll have time to even think about the debt let alone try to do something about it.  Unless somebody can figure out a way that getting rid of it profits the Clinton Foundation, then it'll be gone in a jiffy. 

Bastiat's picture

Just make Chelsea Secretary of the Treasury and fold the assets into the Clinton Foundation -- leave the liabilities of course.

south40_dreams's picture

Princess Chelsea, future president for life!

Archibald Buttle's picture

that would be the first campaign where paternity tests might mean more than tax returns.

Hohum's picture

You forgot corporate and household debt.

Archibald Buttle's picture

bankruptcies for corporate debt!

enslavement for household debt!

get ready to pony up cash money for those mortgages, car loans, credit card accounts and most importantly student loans once the time is ripe to herd the sheeple into the fema camps. and even if you can pay, it pretty much paints a target on your back in a dramatically thinned herd that gets to remain outside the fence.

jmack's picture

debt will go to 40 trillion over next 8 years, regardless of who is in office.  

GreatUncle's picture

Yep, used to be every 10 years, 8 years is optimisitic I was nearer 7 and that time period of doubling is shortening.


MaxThrust's picture

We are not seeing a brick wall. This was all planed. Larry Summers has already launch a trial balloon saying that the FED should loose its indepenence.

When one decyphers what he said, he was really saying that the Oligarch owners of the FED dont want to hold all this toxic debt that has been bought over the last few years so the best course of action is to give the people back control of the FED and they can inherit the debt.

Clara Tardis's picture

Podestas linked to the child porn and pedo and possible abduction?, 4chan, reddit reporting:


Bastiat's picture

Too late; and if Hillary gets in, all evidence, including witnesses will disappear. 

Yen Cross's picture

  Shit,,, Im going to need a bigger role of toilet paper<

Boris Badenov's picture

Trump Rally Song: Ode to Hillary

AKA, Victim of Changes...


knotjammin2's picture

Hey guys!!  Don't worry about it.  If it's Hillary she will just quadruple our taxs and that will take care of everything. I pray everyday that someone on her inner circle would step up and take one for the team!!

Maestro Maestro's picture

Americans are a liability which we the human race can no longer afford.

So we have no choice but to drop you because otherwise you Americans (i.e. NOT human beings) are going to be the death of us human beings.

So on 8 November, we humans will vote AGAINST you Americans with our wallets.

NO US Dollars (or any proxies) for me.

Whether Trump or that monster Hillary wins, it's game over for Americans.


'The fact that Hillary Clinton is still in the game (or even managed to get a nomination), and that the majority of Americans even consider voting for her, says more about the American people than about Hillary Clinton herself: corrupt to the core, it seems.'


Vote accordingly.

P.S. I vote NO FRNs aka US dollars; NO Euros; NO Yens; NO Saudi Rials; NO Chinese Yuans; NO British pounds; NO Russian roubles; and NO Israeli Shekels.

Merry Christmas!

Wahooo's picture

"We really got ourselves into a pickle..."

Who's this "we" you're talking about?

inosent's picture

Hellary = the Dystopian States of America. Better for her to take the fall than Trump for what is going to happen, so it's not all bad in the outside chance she gets selected. The national debt was $9Ts in 2008, its just under 20Ts right now.The exponential rise is due to the cost to cover the accelerating amount of debt.

That means, since nothing is going to change in terms of the money system, the only way to pay the banksters their interest is print $20Ts more in the next 4 years, or savage the American tax payer.

Make no mistake, the central banks don't 'negotiate'. You pay - or else.


Ace006's picture

There's a real upside to a Clinton victory.

hooligan2009's picture

we going to have an early 20 trillion dollar xmas party


yogibear's picture

Next 8 years debt goes to $40 trillion and Fed's balance sheet goes to $10 trillion. Destruction of the US dollar is the goal.

kappal_toba_dhurr_ne_thook's picture

And let us not forget that these debt numbers are the FINANCED liabilities. The UNFINANCED liabilities are over $200 T! USA is the only country that I know of that divides their debt this way in order to fool the public. So you can say that USA debt is the largest in the world, with China a close second.

Aussiekiwi's picture

Rates are never ever going back to Normal, it is simply not possible, next step massive printing, inflation followed by currency collapse and SDR's to the rescue.

everlearner's picture

I don't think anyone in charge gives a rat's ass about the debt - another war or another financial colapse will distract the people enough to keep them in power...

blindman's picture

John Prine & Nanci Griffith : Speed Of The Sound Of Loneliness