CBO Says We Have a Massive Debt Problem

[Proud Tiger 4,261]

The CBO contradicts claims by some here that the debt isn't a problem.

http://www.washingtonexaminer.com/budget-office-u.s.-debt-picture-has-worsened-dramatically/article/2566337

[Weegle777 78]

Naaaaahhhh,we don't have a debt problem. Our government leaders would NEVER lie to us.

[cooltigger21 0]

I thought it didn't matter how much debt we had. We can borrow and spend to our hearts content and never have to worry about it hurting anything. In fact the more we borrow and spend the better for all of us. At least that seems to be the prevailing point that those who don't see a problem would have us believe.

[Proud Tiger 4,261]

ct.....you nailed it.

[AURaptor 1,122]

Dems remind me like what we use to saying college "I can't be on the money, I still have checks". All we have to do is print more money

[japantiger 4,051]

Surprised we haven't seen any of the usual gang rebut this...it's so obvious I guess they can't even get up the nerve.

[autigeremt 6,599]

Non Story

[Weegle777 78]

Hang on, I'll get 'em in here...

[AUTUmike 79]

Sorry fellas, this report isn't as damning as you want it to be. First, long-run debt estimates like this are based on linear projections. While there are many uncertainties in economics, the one thing we can be certain of is that growth and budgets sure as heck aren't going to develop in a linear fashion. And just to be fair, when you see either side stating that their leadership will lead to a balanced budget by "x" date, that too is very inaccurate because of linear calculations. Second, we've known for decades that as the Baby Boomers age, our entitlement programs will be increasingly stressed.

What this report does not say--and what you guys want it to say--is that our economy will be hindered by this forecasted debt increase. As long as economic growth outpaces debt accumulation--which it does and will--then the burden of that debt relative to our economy decreases. Inflation, too, can decrease the value of debt (which the Fed said as recently as today that they were waiting on inflation to increase before they raise interest rates). And before you lemmings run out and invest more in gold, keep in mind that future inflation nor the U.S. debt burden will significantly challenge the value of our currency.

[homersapien 11,366]

I think you should have let them run a little longer mike.

[Proud Tiger 4,261]

Mike....you sound like a great CBO head under Hillary.

[AuburnNTexas 7,140]

Sorry fellas, this report isn't as damning as you want it to be. First, long-run debt estimates like this are based on linear projections. While there are many uncertainties in economics, the one thing we can be certain of is that growth and budgets sure as heck aren't going to develop in a linear fashion. And just to be fair, when you see either side stating that their leadership will lead to a balanced budget by "x" date, that too is very inaccurate because of linear calculations. Second, we've known for decades that as the Baby Boomers age, our entitlement programs will be increasingly stressed.

What this report does not say--and what you guys want it to say--is that our economy will be hindered by this forecasted debt increase. As long as economic growth outpaces debt accumulation--which it does and will--then the burden of that debt relative to our economy decreases. Inflation, too, can decrease the value of debt (which the Fed said as recently as today that they were waiting on inflation to increase before they raise interest rates). And before you lemmings run out and invest more in gold, keep in mind that future inflation nor the U.S. debt burden will significantly challenge the value of our currency.

This report actually used % of Economic Output as basis. It goes from 74% to 103% as such it is taking into consideration growth of the economy. You are correct that they used Linear growth and as such it is not totally reliable but they used Linear Growth both for the Debt and Economic growth as such that balances their numbers out to a point.

In actuality they could have over or underestimated either Debt Growth and or Economic Growth a little bit but the direction of the Debt versus the Economy is correct so best case is our kids will have to wait a little longer before they are in hole they can't get out of.

Also their assumptions are based on the cheap money because of low interest rates if that changes things get worse a whole lot faster. I don't think the sky is falling but I realize like any person who runs a household or a business that when the percent of interest you are paying on your debt increases from year to year it is just a matter of time before you are in trouble. CBO said that Interest was 1.8% of debt in 2014 and is predicting it to be 3.9% by 2024 that is doubling in ten years.

I got that information from https://www.cbo.gov/publication/45684

[mcgufcm 4,096]

I don't think it's a revelation that the percentage of debt comprised of interest grows if you aren't making payments on the principle. Compound interest isn't news, is it?

The CBO is a good thing because they are evaluating something that could turn into an issue at some point, but they're also a bad thing because the information gets misused as a talking point. We're nowhere close to a crisis, and you should be skeptical of anyone that tells you otherwise. Further, in determining what actual revenue, spending, interest, growth (or contraction) will be 20 years from now, there are too many variables to count. You make assumptions and use the results as a benchmark. You don't take the numbers as gospel or treat them as evidence that the sky is falling.

[AUDub 11,147]

...the sky is falling.

All I needed to hear. Anybody know a good way to convert all of my assets to gold bullion or only slightly worn Ron Paul 2012 shirts?

[AuburnNTexas 7,140]

I don't think it's a revelation that the percentage of debt comprised of interest grows if you aren't making payments on the principle. Compound interest isn't news, is it?

The CBO is a good thing because they are evaluating something that could turn into an issue at some point, but they're also a bad thing because the information gets misused as a talking point. We're nowhere close to a crisis, and you should be skeptical of anyone that tells you otherwise. Further, in determining what actual revenue, spending, interest, growth (or contraction) will be 20 years from now, there are too many variables to count. You make assumptions and use the results as a benchmark. You don't take the numbers as gospel or treat them as evidence that the sky is falling.

I was very clear that I did not think the sky was falling all I said is that there is a dangerous trend as in any trend it is easier to stop or slow it down before it reaches a crisis. If it ever reaches the crisis point the cure can be worse then the disease. It is kind of like somebody has Toe Fungus and the medicine can destroy their Liver.

You are 100% correct the CBO's number can and have been used by people on both sides to make a point and as others have said they are just trends and predictions and that could change as the economy is impacted by multiple different things climatic events, wars, plagues, inventions, etc. Some can make the economy better and some can make it worse. Those things can't always be accounted for in a statistical model.

If in a few more years the interest trend has continued then we would be remiss in not taking it seriously. Both sides of the argument should really monitor that and at some point say if it reaches a certain % we have to act. I am not an economist so I can't say what the % is. But I have seen Families, Businesses, and Countries like Greece put into untenable positions by ignoring trends like this.

[icanthearyou 4,462]

I don't think it's a revelation that the percentage of debt comprised of interest grows if you aren't making payments on the principle. Compound interest isn't news, is it?

The CBO is a good thing because they are evaluating something that could turn into an issue at some point, but they're also a bad thing because the information gets misused as a talking point. We're nowhere close to a crisis, and you should be skeptical of anyone that tells you otherwise. Further, in determining what actual revenue, spending, interest, growth (or contraction) will be 20 years from now, there are too many variables to count. You make assumptions and use the results as a benchmark. You don't take the numbers as gospel or treat them as evidence that the sky is falling.

Exactly. Very good post.

IMO, the CBO tends to present more of an accounting perspective, in contrast to that of finance or economics. I think their perspective is important but, it becomes less so if used politically. I think you have to remain in reality rather than drift off into partisan politics.

If you wish to use the "household" model of finance, I think you should consider debt to income (government revenue), rather than debt to GDP. In doing so, I believe it becomes clear that we are not exactly doomed but, we are going to have to come to terms with either raising taxes or, cutting spending (at least until the baby boomers retirement period is behind us). In reality, the practical approach involves the effects of either/both on the economy as a whole. It would probably be the practical application of both. However, in the idiotic, and absolute, world of partisan politics, the thoughtful and practical approach seems to be almost impossible. Therein, lies the true danger. The political divide and the the ideologues are the biggest potential threat. The motives become scoring political points and furthering an ideology, not effective solutions.

[Weegle777 78]

You're welcome.

[AUTUmike 79]

I don't think it's a revelation that the percentage of debt comprised of interest grows if you aren't making payments on the principle. Compound interest isn't news, is it?

The CBO is a good thing because they are evaluating something that could turn into an issue at some point, but they're also a bad thing because the information gets misused as a talking point. We're nowhere close to a crisis, and you should be skeptical of anyone that tells you otherwise. Further, in determining what actual revenue, spending, interest, growth (or contraction) will be 20 years from now, there are too many variables to count. You make assumptions and use the results as a benchmark. You don't take the numbers as gospel or treat them as evidence that the sky is falling.

I was very clear that I did not think the sky was falling all I said is that there is a dangerous trend as in any trend it is easier to stop or slow it down before it reaches a crisis. If it ever reaches the crisis point the cure can be worse then the disease. It is kind of like somebody has Toe Fungus and the medicine can destroy their Liver.

You are 100% correct the CBO's number can and have been used by people on both sides to make a point and as others have said they are just trends and predictions and that could change as the economy is impacted by multiple different things climatic events, wars, plagues, inventions, etc. Some can make the economy better and some can make it worse. Those things can't always be accounted for in a statistical model.

If in a few more years the interest trend has continued then we would be remiss in not taking it seriously. Both sides of the argument should really monitor that and at some point say if it reaches a certain % we have to act. I am not an economist so I can't say what the % is. But I have seen Families, Businesses, and Countries like Greece put into untenable positions by ignoring trends like this.

The trouble with automatic stabilizers is that they handcuff policymakers and unnecessarily limit options of fiscal responses to economic crises--as evidenced by the fiscal strictures of Maastricht rearing its head since late 2007.

And the massive difference in terms of debt management between families, businesses, and Europe versus that of the U.S. is that we enjoy the powerful monetary policy options available by virtue of an independent central bank.

[AuburnNTexas 7,140]

I don't think it's a revelation that the percentage of debt comprised of interest grows if you aren't making payments on the principle. Compound interest isn't news, is it?

The CBO is a good thing because they are evaluating something that could turn into an issue at some point, but they're also a bad thing because the information gets misused as a talking point. We're nowhere close to a crisis, and you should be skeptical of anyone that tells you otherwise. Further, in determining what actual revenue, spending, interest, growth (or contraction) will be 20 years from now, there are too many variables to count. You make assumptions and use the results as a benchmark. You don't take the numbers as gospel or treat them as evidence that the sky is falling.

I was very clear that I did not think the sky was falling all I said is that there is a dangerous trend as in any trend it is easier to stop or slow it down before it reaches a crisis. If it ever reaches the crisis point the cure can be worse then the disease. It is kind of like somebody has Toe Fungus and the medicine can destroy their Liver.

You are 100% correct the CBO's number can and have been used by people on both sides to make a point and as others have said they are just trends and predictions and that could change as the economy is impacted by multiple different things climatic events, wars, plagues, inventions, etc. Some can make the economy better and some can make it worse. Those things can't always be accounted for in a statistical model.

If in a few more years the interest trend has continued then we would be remiss in not taking it seriously. Both sides of the argument should really monitor that and at some point say if it reaches a certain % we have to act. I am not an economist so I can't say what the % is. But I have seen Families, Businesses, and Countries like Greece put into untenable positions by ignoring trends like this.

The trouble with automatic stabilizers is that they handcuff policymakers and unnecessarily limit options of fiscal responses to economic crises--as evidenced by the fiscal strictures of Maastricht rearing its head since late 2007.

And the massive difference in terms of debt management between families, businesses, and Europe versus that of the U.S. is that we enjoy the powerful monetary policy options available by virtue of an independent central bank.

I never said an automatic stabilizer I said there is a point when % that you are paying in Interest becomes a real problem and if you reach that point something has to be done. I realize there is a huge difference between family monetary policy, business monetary policy, and a country like Greece versus the United states is huge. Those are just allegories as basic economic principals still count. It doesn't matter if you get to the point that you owe more then you can pay whether it is a family or the US Government backed by its Central Bank. I remember when most people thought Japan was the economic engine of the world but due to bad economic policies they were humbled. Their society did not crumble but it was on the verge if they had not made some tough choices they may have fallen a long way. It has taken them 20 years to get back to some semblance of what they were. It could have been a whole lot worse.

Icanthearyou was very succinct in stating that partisan politics is part of the problem. There is no one solution you can't just cut spending and solve the issue and you can't just increase taxes to solve the issue. It is a balancing act and we have not been very good at it over the last two administrations.

[mcgufcm 4,096]

Just to be clear, I wasn't really accusing you of saying "the sky is falling". I was speaking more generally than just this website.

[AUTUmike 79]

I don't think it's a revelation that the percentage of debt comprised of interest grows if you aren't making payments on the principle. Compound interest isn't news, is it?

The CBO is a good thing because they are evaluating something that could turn into an issue at some point, but they're also a bad thing because the information gets misused as a talking point. We're nowhere close to a crisis, and you should be skeptical of anyone that tells you otherwise. Further, in determining what actual revenue, spending, interest, growth (or contraction) will be 20 years from now, there are too many variables to count. You make assumptions and use the results as a benchmark. You don't take the numbers as gospel or treat them as evidence that the sky is falling.

I was very clear that I did not think the sky was falling all I said is that there is a dangerous trend as in any trend it is easier to stop or slow it down before it reaches a crisis. If it ever reaches the crisis point the cure can be worse then the disease. It is kind of like somebody has Toe Fungus and the medicine can destroy their Liver.

You are 100% correct the CBO's number can and have been used by people on both sides to make a point and as others have said they are just trends and predictions and that could change as the economy is impacted by multiple different things climatic events, wars, plagues, inventions, etc. Some can make the economy better and some can make it worse. Those things can't always be accounted for in a statistical model.

If in a few more years the interest trend has continued then we would be remiss in not taking it seriously. Both sides of the argument should really monitor that and at some point say if it reaches a certain % we have to act. I am not an economist so I can't say what the % is. But I have seen Families, Businesses, and Countries like Greece put into untenable positions by ignoring trends like this.

The trouble with automatic stabilizers is that they handcuff policymakers and unnecessarily limit options of fiscal responses to economic crises--as evidenced by the fiscal strictures of Maastricht rearing its head since late 2007.

And the massive difference in terms of debt management between families, businesses, and Europe versus that of the U.S. is that we enjoy the powerful monetary policy options available by virtue of an independent central bank.

I never said an automatic stabilizer I said there is a point when % that you are paying in Interest becomes a real problem and if you reach that point something has to be done. I realize there is a huge difference between family monetary policy, business monetary policy, and a country like Greece versus the United states is huge. Those are just allegories as basic economic principals still count. It doesn't matter if you get to the point that you owe more then you can pay whether it is a family or the US Government backed by its Central Bank. I remember when most people thought Japan was the economic engine of the world but due to bad economic policies they were humbled. Their society did not crumble but it was on the verge if they had not made some tough choices they may have fallen a long way. It has taken them 20 years to get back to some semblance of what they were. It could have been a whole lot worse.

Icanthearyou was very succinct in stating that partisan politics is part of the problem. There is no one solution you can't just cut spending and solve the issue and you can't just increase taxes to solve the issue. It is a balancing act and we have not been very good at it over the last two administrations.

Not to belabor the point, but it DOES matter if you're talking about family finances versus that of the U.S. since the U.S. can literally print money. (And as things stand now, the eventual resulting inflation would be a positive sign; not to mention the fact that it would decrease the debt burden).

Yeah, no doubt partisan politics is a big part of the problem. Democrats correctly employ Keynesian policies when the economy is struggling but then incorrectly fail to continue Keynesianism when recovery is achieved (raising taxes and cutting spending to allow for future fiscal flexibility). Republicans incorrectly obsess over cutting taxes, cutting spending, and sacrificing growth--at times--to maintain miniscule inflation regardless of the economic situation.

[cooltigger21 0]

I don't think it's a revelation that the percentage of debt comprised of interest grows if you aren't making payments on the principle. Compound interest isn't news, is it?

The CBO is a good thing because they are evaluating something that could turn into an issue at some point, but they're also a bad thing because the information gets misused as a talking point. We're nowhere close to a crisis, and you should be skeptical of anyone that tells you otherwise. Further, in determining what actual revenue, spending, interest, growth (or contraction) will be 20 years from now, there are too many variables to count. You make assumptions and use the results as a benchmark. You don't take the numbers as gospel or treat them as evidence that the sky is falling.

I was very clear that I did not think the sky was falling all I said is that there is a dangerous trend as in any trend it is easier to stop or slow it down before it reaches a crisis. If it ever reaches the crisis point the cure can be worse then the disease. It is kind of like somebody has Toe Fungus and the medicine can destroy their Liver.

You are 100% correct the CBO's number can and have been used by people on both sides to make a point and as others have said they are just trends and predictions and that could change as the economy is impacted by multiple different things climatic events, wars, plagues, inventions, etc. Some can make the economy better and some can make it worse. Those things can't always be accounted for in a statistical model.

If in a few more years the interest trend has continued then we would be remiss in not taking it seriously. Both sides of the argument should really monitor that and at some point say if it reaches a certain % we have to act. I am not an economist so I can't say what the % is. But I have seen Families, Businesses, and Countries like Greece put into untenable positions by ignoring trends like this.

The trouble with automatic stabilizers is that they handcuff policymakers and unnecessarily limit options of fiscal responses to economic crises--as evidenced by the fiscal strictures of Maastricht rearing its head since late 2007.

And the massive difference in terms of debt management between families, businesses, and Europe versus that of the U.S. is that we enjoy the powerful monetary policy options available by virtue of an independent central bank.

I never said an automatic stabilizer I said there is a point when % that you are paying in Interest becomes a real problem and if you reach that point something has to be done. I realize there is a huge difference between family monetary policy, business monetary policy, and a country like Greece versus the United states is huge. Those are just allegories as basic economic principals still count. It doesn't matter if you get to the point that you owe more then you can pay whether it is a family or the US Government backed by its Central Bank. I remember when most people thought Japan was the economic engine of the world but due to bad economic policies they were humbled. Their society did not crumble but it was on the verge if they had not made some tough choices they may have fallen a long way. It has taken them 20 years to get back to some semblance of what they were. It could have been a whole lot worse.

Icanthearyou was very succinct in stating that partisan politics is part of the problem. There is no one solution you can't just cut spending and solve the issue and you can't just increase taxes to solve the issue. It is a balancing act and we have not been very good at it over the last two administrations.

Taxes do not need to be raised period. We're taking in well more than enough revenue to fund the government to do what it should do and then some. Actually we could just freeze spending and it wouldn't place any hardship on anyone. Problem is people who want to raise taxes and spending at the same time. It's the old idea that government must grow. We could reduce spending by a lousy 5% each year and it wouldn't be noticed in the economy. It's not a difficult thing to figure out. We've got welfare programs stacked on top of each other spread across multiple agencies. Close one or two agencies like HUD and transfer their responsibilities elsewhere.