BARRON'S BLASTS OBAMA: 'Follow Me, We Can Be Like Greece'

[thenews]

Barron's goes there. (Economics editor Gene Epstein is not President Obama's biggest fan.) Here's the lede from the latest cover story:

In his State of the Union speech last Tuesday, President Obama concluded that "the State of our Union is stronger." The big question is: stronger than what?

Federal debt is a record $12.2 trillion, or 76% of the nation's annual output of goods and services. While that's still well below Greece's 153%, we're headed steadily in the wrong direction.

According to estimates by the Congressional Budget Office, adjusted by Barron's to account for recent tax increases and other factors, if the U.S. doesn't raise taxes further and cut spending dramatically, the national debt could easily reach 153% of economic output by 2035.

These are not just numbers. If the U.S. national debt continues ballooning, we can be sure of a deep, long-lasting recession -- very likely a depression -- sometime in the next two to three decades. The unemployment rate could easily surge to 20%.

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[seekers]

It seems that that estimate (2035) is optimistic. Read the comments. One comment us quite enlightening :

Bruce Krasting wrote:

Why does the author exclude the Intergovernmental debts? Do these debts not count?

The interest cost on the intergovernmental debt is much higher than the Debt owed to the Public. Public debt can always be rolled over, but IG debts must be paid in cash. When the IG is paid off, it will add to the public debt on a dollar for dollar basis.

I think the IG debt is every bit as toxic as the Debt to the Public. In some respects, it is more toxic. The fact that Barrons excludes $5T of US debt in this article speaks for itself. No one cares about it.

Run these numbers again. Include the IG debt as it were equal to the debt owed to the public. That will ruin your weekend.