Michael Barone
Real Clear Politics
3/25/2010
Not many people noticed amid the Democrats’ struggle to jam their health care bill through the House, but in recent weeks U.S. Treasury bonds have lost their status as the world’s safest investment.
The numbers are pretty clear. In February, Bloomberg News reports, Berkshire Hathaway sold two-year bonds with an interest rate lower than that on two-year Treasuries. A company run by a 79-year-old investor is a better credit risk, the markets are telling us, than the U.S. government.
Buffett’s firm isn’t the only one. Procter & Gamble, Johnson & Johnson and Lowe’s have been borrowing money at cheaper rates than Uncle Sam.
Democrats wary of voting for the health care bill may have been soothed by the Congressional Budget Office’s report that it would reduce federal deficits over the next 10 years. But bond buyers know that the Democrats gamed the CBO system to get a good score.
The realities, as former CBO Director Douglas Holtz-Eakin pointed out in The New York Times, are different. The real cost is disguised by the fact that the bill includes 10 years of revenue but only six years of spending. It includes $70 billion in premiums for long-term care that will have to be paid out later. It excludes $114 billion in discretionary spending needed to run the program. It includes nearly half a trillion dollars in unrealistic Medicare savings.
Holtz-Eakins’s bottom line: The bill will not lower deficits, but will raise them by $562 billion over 10 years. Treasury will have to borrow that money — and probably pay much higher interest than it’s paying now…
…Barack Obama’s project of transforming the United States into something like Western Europe is, according to the CBO, raising the national debt burden on the economy to World War II levels. I see train wrecks ahead — as the bond market forces huge spending cuts or tax increases first on states and then on the federal government. It will make what happened in the House Sunday look pretty.
The entire article is at Real Clear Politics.
