Posted on 06/06/2010 3:16:24 PM PDT by blam
Bloomberg: US Debt To Overtake GDP In 2012
By Rocky Vega
06/06/10 Stockholm, Sweden – US debt continues surging higher and the chart below shows a likely outcome: debt will exceed GDP in as early as 2012. Yep, that’s fewer than two years from now.
From Bloomberg:
“…the government’s total debt [...] rose past $13 trillion for the first time this month. The amount owed will surpass GDP in 2012, based on forecasts by the International Monetary Fund. The lower panel shows U.S. annual GDP growth as tracked by the IMF, which projects the world’s largest economy to expand at a slower pace than the 3.2 percent average during the past five decades.”
One concern about the rising debt is what PIMCO’s Bill Gross refers to as “the debt super cycle trend.” It’s a situation where the US eventually increases interest rates but, without improved economic growth, it gets much harder to pay debt-related bills. The US may have lot more difficulty selling its debt, or servicing it, when the lines below cross.
You can click the chart below or follow this link to see a bigger version and read Bloomberg’s accompanying article. (Note that there are two tabs, “story” and “graphic.”)
This needs to differentiate between debt held by the public and the accounting entries for debt held by different US Treasury Accounts, (like the SS Trust fund), which is simply an accounting fiction.
These liabilities don't exist. Its obviously impossible to pay for them short of simply printing piles of paper money. Therefore, benefits will clearly be cut to match more closely to actual receipts.
If you read the reports put out by the actuaries, the cuts will be on the order of 25% of expected payments in order to balance the system. There are a variety of ways this will occur, with the most likely being to raise the full retirement age to somewhere between 70 to 75, and to cut the ratio for calculating benefits due when collection is begun at 62.
bookmark
“Its obviously impossible to pay for them short of simply printing piles of paper money. Therefore, benefits will clearly be cut to match more closely to actual receipts.”
Based on observing the actual behavior of politicians, I cannot share your optimism. We’ve been kicking the can down the road for many years already. This issue is easily demagogued by partisans on both sides of the aisle.
Given a choice between politically unpopular cuts in benefits and the tempting choice of “painlessly” (invisibly) paying for these benefits with IOUs later monetized through inflation, I fear we will elect the latter approach more often than not. Even if we optimistically are able to address 3/4 of these unfunded liabilities through cuts in benefits, the residual amount would still nearly double an already unsustainable debt load. The picture isn’t pretty.
It would be outlawed post haste however once it were seen as a predominant political power.
Heh - If it was predominant, it could not be outlawed.
>These liabilities don’t exist.
They certainly do.
Exactly. Invest in precious metals now: copper, lead, brass.
The Secession Party!
It has a ring to it.
It would be outlawed post haste however once it were seen as a predominant political power.
I like “Robinsonian Free Republic Party” myself!
Fine. Just stop collecting the funds from me today while I am in my 40s and maybe in 25 years I will been able to make and save enough that I could wind up better off. Even $10K saved for year for 25 years would be light years ahead of what Uncle Sam would be paying out over 12-15 years before I died.
Bush was between a rock and a hard spot. Congress had him by the balls, attaching all sorts of pork and social agenda themes to defense appropriations bills and supplements that were required for Iraq and the GWOT. If Bush had vetoed these bills because of their pork, pandering to special interests such as the GLBT community..... he would have had to shoot himself in the foot with Iraq and the GWOT. He played his hand as good as he could, but he simply had a shitty hand especially after the 2006 Congressional elections: http://en.wikipedia.org/wiki/United_States_House_of_Representatives_elections,_2006
Bush was hostage of the war and our national security needs. The war was perceived as a Republican and Bush administration doing and the Democrats played the opposition political game. In addition, Congress used the need for war spending to drive their big government and social permissive agenda.
It's really Congress, not Bush that was the culprit during his reign when it came to spending. Most the early big spending under the Bush administration was for the war in Afghanistan, Iraq and greater GWOT. When Congress flipped that changed and the fact that the administration had to support the war effort was used by the opposition to fund all sorts of pork. Even the Bush bail out of the financial sector didn't go a fraction as far as what they have taken it to. But that won't prevent them from blaming everything negative on Bush and taking any credit for anything good, even two years in office.
You hate America first.
The Republicans and GW Bush nearly doubled our national debt in 8 years with few complaints.
Unpatriotic! You obviously love Osama bin Laden and want to be a terrorist!
What's next? Are you going to contradict the received wisdom that debt is prosperity? There are plenty of cool heads around Free Republic that can explain that debt is good.
2011
You must not understand that that will increase the velocity of money. Maybe you need someone with a newly minted MBA to explain it to you. They can also explain why savings are bad and why your savings should lose value over time.
No, they don’t exist. The notion of them being “unfunded” liabilities relies on various assumptions about the future behavior of people regarding population growth from births and immigration, and the future growth of the economy and tax receipts, and changes in the price level.
Reality is that it is impossible to fund and finance anything like what is currently promised, therefore the promises will not be delivered.
ObaConomics at work. Thanks Obama, you **** ****** ******* *** ********!!!
Well, I gotta give Obama and his supporters credit; they’re bankrupting the U.S.A. in record time.
As much as I hate to say it he was not completely held hostage.
If it it was that important that the money be spent then it was important enough that he could have appeared on television, told Americans how important it was, and asked us all to sacrifice for it.
I hate taxes more than anyone. I devoted a good portion of my time during my working life to ensuring I paid as little as I could legally get away with. This does not mean I think fighting a war without the revenue to support it is a good idea. Never in the history of mankind has a civilization cut taxes during a major war except for us. We did it under LBJ during Vietnam and we did it under Bush.
Everyone knows what LBJ’s policies ended up doing and how it took us almost two decades to pull out and Bush’s refusal to practice fiscal discipline will hurt us for at least a decade if not more.
You may say Bush had to have the pork to pay for the war. Fine, I’ll buy that. He should have then been man enough to tell the American people that the war would require a sacrifice of all of us in higher taxes rather than just running up the deficit like he did.
“The states need to get together and stop this madness!
It won’t happen until state governments grow a pair and pull away from the Washington D.C. teat willfully.”
BINGO!
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