When The Bills Come Due

There is a good editorial today in the NYT about New Jersey's struggle to pay off the $32B debt that reckless prior governors and legislators ran up in order to appease voters. Ultimately, the challenge is now one where the debt has grown so large that interest payments are becoming a problem to pay. In fact, the State of New Jersey now has to come up with over $2B annually to cover interest alone.

Fortunately Gov. Corzine has said enough is enough. He actually pushed a budget that is less this year than last year. Not a decrease in growth (as is normally a politician's way of saying he cut spending), but a real decrease in money for 2009 vs. 2008. The Governor's good work is going to produce a $650M windfall to pay down the debt. This sounds great, but it only reduces the cost of debt by $130M (interest). At this rate, New Jersey will never get out of debt.

This is certainly a lesson for other government entities, including the Federal Government. Eventually you take on so much debt that the debt service cost becomes very hard to pay. New Jersey has reached this point and the Feds are getting closer to this same point every year. In 2007, the Feds spent $430B on interest on the national debt. This was the third largest budget item in 2007.

In 2008, the national debt will exceed $10T! This is not what is promised in future benefits (that number is closer to $60T), but the actual federal debt, money that has already been borrowed. This figure represents over $33,000 in debt for every citizen in the country. For a family of four it is a debt over $133,000. Most families do not even have a mortgage this large, but they are being force to cover the interest expense on this debt.

It is time to get this spending under control before we mortgage the future of our children and put the Federal Government in the same position as New Jersey. Vote for fiscal restraint and smaller government and save our children's future.