AEI Study: Obama Deficits May Lead to Major Middle-Class Tax Hike

With each passing day the national debt grows. As of this writing its over $16.08 trillion, a growth of more that $5 trillion since Obama took office.

Just like your home mortgage, someone has to pay interest on the loan---that someone is US.  A new study by the American Enterprise Institute tells points to the fact why middle class voters cannot afford another four years of Obama.

Well, according to the Congressional Budget Office, the latest White House budget would add $7.6 trillion of debt from 2012 to 2022. In a new paper, AEI’s Matt Jensen looks at the real annual cost of servicing the debt for households at various levels of income — including a potentially higher tax burden.

As the table below illustrates, a household making between $100,000 and $200,000 a year could find its tax liability higher by roughly $2,400 every year. Over ten years, that works out to $24,000.

And when you add in the debt already accrued the past four years under President Obama (the second table), that’s another $1,600 a year. So now we are now talking about $4,000 a year, $40,000 over ten years.

A couple of caveats: To compute these annual costs, Jenses uses the long-run average effective real interest rate on U.S. debt from the Congressional Budget Office. According to the CBO, the average effective real interest rate on U.S. debt will be 2.7% in 2025 and then remain at approximately the same level until their projections end in 2087. Of course, as real income grows over time,a fixed cost of debt service becomes less burdensome. Second, it should be noted that interest rates are currently much lower in the U.S. Using the long run average instead of current implies that the numbers should be interpreted as a long run expected cost of servicing the debt.

 In other words, Obamanomics will be coming to a checkbook near you.  And you will not like the result.