"The Congressional Budget Office is estimating that annual interest payments on federal debt will more than double over the next decade to $778 billion.
Put another way, the U.S. will soon be paying federal debt interest (much of it to Asian and Middle East creditors) equal to the U.S.'s annual defense budget.
What assumptions lay behind the CBO's estimates? From the WSJ:
In 2010, it (the U.S. federal government) paid an average of about 0.1% interest on 3-month Treasury bills, and 3% on ten-year notes. Total net payments amounted to $197 billion, or 1.4% of annual economic output. That’s a bit more than what the government spent on unemployment insurance.
Low interest rates, however, won’t last forever — assuming the U.S. economy doesn’t succumb to long-term, Japanese-style stagnation. The CBO estimates that interest rates on 3-month bills and 10-year notes will reach 5.0% and 5.9%, respectively, by 2020. That, together with a rapidly rising debt load, would cause annual net interest payments to more than double by 2020 — to $778 billion, or a record 3.4% of GDP.
As bad as that sounds, I believe the CBO could be painting an overly optimistic scenario.
Whether the U.S. will actually be able to borrow long-term at a (historically) relatively low 5-6% interest rate in a decade's time is pure speculation by the CBO..."
at http://www.businessinsider.com/are-the-cbos-us-debt-burden-projections-overly-optimistic-2011-1?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29#ixzz1BK2VGLIu
No comments:
Post a Comment