The CBO issued its report today regarding the Government's debt problems. Here are some highlights and comments.
First the estimates of the GDP and Publicly Held Debt as shown above. There is an assumption of substantial GDP growth and the Public Debt just continues. There is not word about the Intragovernmental Debt which is Social Security and the like. One must remember that the Government takes those funds, spends them, and then owes itself. There is at this time 40% of the total debt being intragovernmental, almost half. If we assume that that ratio continues one must remember that this debt held by the public is only 60% of the total debt!
Now the above shows the annual change. The Debt change is explosive for the next three years and on an ongoing basis stays above the rate of growth of the GDP. That is an UNSTABLE process. Clearly the White House is not focusing on solving the long term problem.
The above chart shows the debt held by the Public to the GDP and it is growing to almost 70%. Also remember that when you add the Intragovernmental Debt it raises this another 60% to a total of 130%! That will cause a collapse of the system. No one seems to be paying attention. This will destroy the economy.
There are several assumptions here which are worrisome:
1. The growth rates of the GDP may be overestimated. Given the money taken from the economy it is highly questionable if any entrepreneurial creation of value will occur. Between the taxes and the funds flowing into Government programs it will tend to wipe out the private sector.
2. There is not accounting for inflation. The only good news is the reappointment of Bernake but the Democrats in the Senate will have at him for reasons which I cannot fathom other than its Washington.
3. Who is to finance this debt and under what conditions. There could be private calls coming into to Treasury saying that the sovereign wealth funds are just not interested.
There are also a plethora of other concerns but this is a start.
First the estimates of the GDP and Publicly Held Debt as shown above. There is an assumption of substantial GDP growth and the Public Debt just continues. There is not word about the Intragovernmental Debt which is Social Security and the like. One must remember that the Government takes those funds, spends them, and then owes itself. There is at this time 40% of the total debt being intragovernmental, almost half. If we assume that that ratio continues one must remember that this debt held by the public is only 60% of the total debt!
Now the above shows the annual change. The Debt change is explosive for the next three years and on an ongoing basis stays above the rate of growth of the GDP. That is an UNSTABLE process. Clearly the White House is not focusing on solving the long term problem.
The above chart shows the debt held by the Public to the GDP and it is growing to almost 70%. Also remember that when you add the Intragovernmental Debt it raises this another 60% to a total of 130%! That will cause a collapse of the system. No one seems to be paying attention. This will destroy the economy.
There are several assumptions here which are worrisome:
1. The growth rates of the GDP may be overestimated. Given the money taken from the economy it is highly questionable if any entrepreneurial creation of value will occur. Between the taxes and the funds flowing into Government programs it will tend to wipe out the private sector.
2. There is not accounting for inflation. The only good news is the reappointment of Bernake but the Democrats in the Senate will have at him for reasons which I cannot fathom other than its Washington.
3. Who is to finance this debt and under what conditions. There could be private calls coming into to Treasury saying that the sovereign wealth funds are just not interested.
There are also a plethora of other concerns but this is a start.
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