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Federal Debt and the Risk of a Financial Crisis; From CBO Blog
Topic Started: Jul 27 2010, 09:12 PM (211 Views)
Baldo
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A Warning from the Director of the Congressional Budget Office

Federal Debt and the Risk of a Financial Crisis

In fiscal crises in a number of countries around the world, investors have lost confidence in governments’ abilities to manage their budgets, and those governments have lost their ability to borrow at affordable rates. With U.S. government debt already at a level that is high by historical standards, and the prospect that, under current policies, federal debt would continue to grow, it is possible that interest rates might rise gradually as investors’ confidence in the U.S. government’s finances declined, giving legislators sufficient time to make policy choices that could avert a crisis. It is also possible, however, that investors would lose confidence abruptly and interest rates on government debt would rise sharply, as evidenced by the experiences of other countries.

Unfortunately, there is no way to predict with any confidence whether and when such a crisis might occur in the United States. In a brief released today, CBO notes that there is no identifiable “tipping point” of debt relative to the nation’s output (gross domestic product, or GDP) that would indicate that such a crisis is likely or imminent. However, in the United States, the ratio of federal debt to GDP is climbing into unfamiliar territory—and all else being equal, the higher the debt, the greater the risk of such a crisis.

Over the past few years, U.S. government debt held by the public has grown rapidly. According to CBO’s projections, federal debt held by the public will stand at 62 percent of GDP at the end of fiscal year 2010, having risen from 36 percent at the end of fiscal year 2007, just before the recession began. In only one other period in U.S. history—during and shortly after World War II—has that figure exceeded 50 percent.

Further increases in federal debt relative to the nation’s output almost certainly lie ahead if current policies remain in place. The aging of the population and rising costs for health care will push federal spending, measured as a percentage of GDP, well above the levels experienced in recent decades. Unless policymakers restrain the growth of spending, increase revenues significantly as a share of GDP, or adopt some combination of those two approaches, growing budget deficits will cause debt to rise to unsupportable levels, as shown in the figure below. (For more details, see CBO’s recent report The Long-Term Budget Outlook.)...snipped

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http://cboblog.cbo.gov/?p=1249
Edited by Baldo, Jul 27 2010, 09:20 PM.
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Mason
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Parts unknown
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And the News will be Obama's appearance on The View - with him hugging sycophantic women and them basking in his greatness.

Crank the numbers and things are going to go bad. It's almost time for Obama to shift from Spend mode to Tax mode.

They can't Tax their way outta this - and everyone with half a brain knows it.

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kbp

Not good news for anybody, and especially not for Dem's running for office.
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Baldo
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Unfortunately I don't see a way out of this without throwing the Dems out of office in November and replacing them with honest, ethical, and dedicated men and women who place the well being of the USA Citizens first.

Both are hard targets to achieve. Politics has become what's in it for me.

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