CBO: Federal Debt and the Risk of a Financial Crisis

Discussion in 'Economy' started by boedicca, Jul 27, 2010.

  1. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    Even the CBO Director is now publicly stating that the debt is looking far worse.

    The official CBO baseline is cooked up using very constrained, often unrealistic, assumptions under current laws. The CBO has also released an "Alternative Fiscal Scenario" which adjusts projections for things such as an increase in interest rates (the low levels now are unprecedented and unsustainable). The alternative scenario shows Debt to GDP ratios exceeding 175% within 20 years - and this doesn't address unfunded Social Security liabilities which are not included in the official debt levels.

    Although deficits during or shortly after a recession generally hasten economic recovery, persistent deficits and continually mounting debt would have several negative economic consequences for the United States. Some of those consequences would arise gradually—but a high level of federal debt, combined with an unfavorable long-term budget outlook, would also increase the probability of a sudden fiscal crisis prompted by investors’ fears that the government would renege on the terms of its existing debt or that it would increase the supply of money to finance its activities or pay creditors and thereby boost inflation. The resulting abrupt rise in interest rates would create serious challenges for the U.S. government. For example, a 4-percentage-point across-the-board increase in interest rates would raise federal interest payments next year by about $100 billion; if those higher rates persisted, net interest costs in 2015 would be nearly double the roughly $460 billion that CBO currently projects for that year. Such an increase in rates could also precipitate a broader financial crisis because it would reduce the market value of outstanding government bonds, inflicting losses on mutual funds, pension funds, insurance companies, banks, and other holders of federal debt.

    Director's Blog Blog Archive Federal Debt and the Risk of a Financial Crisis


    Conclusion: The CBO Office declares Obamanomics to be an Epic Fail.
     
  2. Oddball
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    Oddball BANNED Supporting Member

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    [​IMG]
     
  3. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    That picture is inaccurate. Obamanero would most certainly make Gibbs play the violin for him while he waltzed off to the golf course.

    ;)
     
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  4. Oddball
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    Oddball BANNED Supporting Member

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    Couldn't find a pic of him putting while Rome burns. :lol:
     
  5. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    Perhaps Daveman could photochop one for us!
     
  6. william the wie
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    william the wie Gold Member

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    I don't think the D terror at losing the senate as well as the house this fall has been figured into the equations. They've got three months to turn this projection around and like the prospect of hanging this sort of thing does focus the mind.
     
  7. rdean
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    rdean rddean

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  8. Oddball
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    Oddball BANNED Supporting Member

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    Tax cuts don't "cost" anything, unless the premise is that your money belongs to gubmint to begin with.

    The only thing that costs money is spending.
     
  9. topspin
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    topspin BANNED

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    can we get a whambulance for the crybabies.
     
  10. rdean
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    rdean rddean

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    Then who is paying for those two wars? Are they also "free"?
     

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