Global accounting firm says US debt crisis is "bigger than you think"

I thought we were fine....?
Isn't that what they said????


"The debt crisis is likely bigger than you think," a report issued by Deloitte, one of the world's largest accounting firms, concluded.

That is because interest payments on the country's massive debt add a whole new level of fiscal pain to the problem.

Interest payments on the national debt alone, it noted, are expected to total some $US4.2 trillion over the next decade.

And that number could go higher depending on rates.

The lead author of the Deloitte study, director Bill Eggers, stressed that US Government debt could quickly spiral out of control if investors become less willing to lend more money.

"If interest rates go up by simply three per cent over the next decade, the additional cost to the Treasury, just for interest payments, would equal the peak combined cost of the wars in both Afghanistan in Iraq," he said.

The report showed that $US4.2 trillion being spent on interest could instead:

- build 130,000 kms of highways
- pay tuition for every science/math/engineering college degree in the country
- triple US government general research and development funding
- build six international space stations
- offset 80 per cent of global warming pollution in the atmosphere as recommended by the Intergovernmental Panel on Climate Change

But not all economists are on board with the implications of the study.

"The major holders of government bonds are agencies and individuals within the US," Robert Stonebraker, an economics professor at Winthrop University, told FOXNews.com.

"So if you pay $US1 trillion in interest on the debt, a lot of it will go back to Americans anyway."

But Mr Eggers noted that a lot of the interest payments do go overseas.

"If you look at the interest payments going to foreign countries, soon we're going to be spending enough to essentially finance the Chinese military," he said.

Currently, foreigners own some $US5 trillion in US Government bonds, $US1 trillion of which is owned by China.

Not all economists agree with the study.

"I think they're overhyping the need to fix the debit crisis in short run," Dr Stonebraker said.

"It's not appropriate to cut spending during an economic slowdown -- that is exactly when you need deficit spending to stimulate the economy and get people back to work," he said.

Read more: http://www.news.com.au/business/markets/top-global-accounting-firm-deloitte-says-us-debt-crisis-is-bigger-than-you-think/story-e6frfm30-1226393783077#ixzz1xgCpbdvN