The Road to Fiscal Ruin by Dr. Douglas O. Walker

Both the New York Times and the Wall Street Journal have recently published articles about the burgeoning level of government debt and the escalating deficit that adds to its weight.

The Federal government ran a deficit of $1.4 trillion in fiscal year 2009 and spending continues to far outpace revenues this fiscal year, adding greatly to a mounting national debt that now stands at more than $12 trillion.

Worse, rather than dealing with the recession that now grips the nation or the looming explosion in Social Security and Medicare benefits now on the horizon, the Administration and Congress have chosen to aggravate the country's problems by pushing for an expensive new health care entitlement which will add greatly to the country's fiscal woes. They seem completely oblivious to the fiscal nightmare they are creating.

As noted in the Times, one reason for their blindness may be that much of the recently acquired debt was financed at abnormally low interest rates brought about by the recession. These low rates made the acquisition of new debt and refinancing of old seem tolerable, at least for the moment.

However, as is always inevitable, this will soon change. The Treasury now faces what could be a significant rise in interest rates at a time when it has an immediate need for new borrowing as well as re-financing the huge debt it previously issued. According to the Times article, the Treasury estimates $1.6 trillion of the government's marketable debt is coming due in the next few months.

Added to this, as stressed in the Journal, is the need to fund higher costs associated with rising Social Security, Medicare and Medicaid expenses.

The credit demand of the Federal government seems insatiable. It raises questions about whether its huge deficits can be financed without markedly worsening the prospects for a recovery.

China and Germany as well as other countries are increasingly worried about this country's financial position and have been warning about the deteriorating state of U.S. finances. I for one am glad they are expressing their concern.

But given the way the Administration and Congress are conducting U.S. economic policy, I wonder if anyone in the U.S. government is equally concerned.