Economics

This Chart on Fed Debt Projections Will Make You Cry Like Edmund Muskie in a Parking Lot

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This chart comes from Reason columnist and Mercatus Center economist Veronique de Rugy, writing in The American. Here's the snapshot:

Trillions of dollars in projected federal budget deficits over the next decade threaten long-term economic stability and complicate the president's spending plans.

The chart [above] illustrates this point. Based on Congressional Budget Office data, it represents the interest the government paid on the federal debt as a percentage of GDP between 1962 and today and the projected debt service payments up until 2082. The projections are illustrated under the current CBO baseline and under the CBO alternative, more realistic, scenario. For comparison, the graph also shows CBO's projections for the cost of Medicare and Social Security as a percentage of GDP. Notice that under either of CBO's scenarios, the net interest payments, or the costs of the debt, rival the cost of two of our nation's most expensive social programs.

More here.

Without even getting in the "alternative, more realistic, scenario," look upon our future and despair. Start clipping coupons now!

NEXT: White House Jobs Summit Causes Unemployment Rate to Fall

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  1. What makes you think we’re not blubbering like Jerry Falwell already?

    It’s been a long 11 months.

  2. You are right dude,that is downright scary is it not??

    RT
    http://www.be-invisible.ua.tc

  3. Yes, but don’t we have a God-given right to all these goodies being passed out by Leviathan?

  4. What language do they speak in New Zealand again? Maybe if I learn it, I’ll have a better chance of emigrating there.

    1. If the movies are any indication, there’s Orc, Mordorian, Dwarvish, Elven and Goblin.

      1. Most elves spoke a variety of Quenya (though earlier Telerin was more prevalent).
        Dwarfs spoke Khuzdul.
        Goblins were a cave-dwelling subspecies of Orc… Orcs spoke a variant of the Black Speech.

        [Hey, Mom! Bring me more Cheetos!]

    2. Bret: Did she sound Australian? Australian accent?

      Jemaine: Yes, yes.

      Bret: What did it sound like?

      Jemaine: Kind of like an evil version of our accent.

    3. I think English.

    4. Dude, I called New Zealand months ago. Back off, I don’t need someone else taking my quote slot!

  5. Ahhh, the dreaded hockey stick graph. Here’s my dumbass question of the day. Why is the use of projected numbers okay for an economic doomsday graph but bad on a global warming doomsday graph?

    1. Because we can get the data necessary to reproduce the graph? Because the CBO isn’t passing around code and emails attempting to monkey around with the result for political reasons?

      1. Sure, unlike every other part of the government the CBO is trustworthy

    2. Here’s my dumbass question of the day: Still on the dole?

      1. Why yes. Yes I am.

        1. Hey. Where’s Perry?

        2. You better be eating government cheese for breakfast, lunch, and dinner, buddy.

          It’s good for your pelt, too.

          1. Powdered eggs, too. BTW, why you on the dole and posting on a libertarian site?

            1. Oh shit. I outted myself again. I keep forgetting that I am not qualified to post on a website dedicated to the master political ideology. I’ll be back when my papers are in order.

              1. Don’t worry. I work for the gummint right now. I gotta keep my head down.

              2. I’ve heard you tell parts of your story, and I don’t really blame you for accepting money that you may have paid in over time in the many forms of taxes and fees that were probably used for things you didn’t want the government paying for, etc.

                But, are you unemployable? I mean, you seem coherent enough and based on your comment count, you could easily do my private sector job.

                1. You may be overestimating my coherence. It isn’t my intent to be on disability from uncle Sam forever. It is, however, a necessary income source at this time to help support my family. My wife and I have several irons in the fire that are earning extra money and two are growing nicely. They are home-based which allows me to be productive as much as I can. My health problems preclude me from working outside the home and always will but it doesn’t keep me from developing ways to earn enough to be independant in the future.

                  1. I’ve had this discussion with people many times in the past – people who believe it’s hypocritical to be libertarian or anarchist and accept unemployment money.

                    It isn’t. Anyone who’s been forced to pay taxes their whole lives recouping some of that loss by taking advantage of that which they were force to support is just fine. The only thing that would be hypocritical is if you claimed to be libertarian and yet regularly advocated increases in that system.

                2. One last thing. It is curious that when a person is found to be “on the dole” suddenly you guys feel it’s okay to decide what I eat and whether or not I can work and how I should spend my time. All this with very little knowledge of my actual situation. How very nannyist of you.

                  1. To be fair, it means you’re living on our money, so…

    3. Because the spending habits of politicians are well known and easily predictable?

    4. Why is the use of projected numbers okay for an economic doomsday graph

      Americans don’t get philosophy or economics
      but they can sorta understand colorful pictures.
      That’s why.

    5. Because we can easily predict what will happen to interest payments over time based on current expenditures and interest rates. This is no extrapolation, this is just taking what our debt is today and forecasting future debt payments to service that debt. It’s not black magic, it’s simple math.

  6. Actually this comforts me somewhat. I actually thought that things 70 years down the road would be way way worse.

    1. In 70 years we’ll just look back and laugh, laugh, ….

  7. Gee, the way I look at it, the percentage of GDP devoted to servicing the debt in 2009 is about half of what it was back in Ronnie Reagan’s day. I guess we’ll have to do what Ronnie, George I, and Bill did–raise taxes!
    I mean, after all, it worked. The problem started when George II started cutting them.

  8. Technological advances will employ everybody and increase tax revenue and everything will be just fine. I am sure I am not the only person predicting a “Smellovision Bubble.”

    1. Smellovision replaces television – Carl Stalling sez, ‘It’ll never work’

  9. The rich will save us

    http://blogs.reuters.com/felix…..ll-return/

    …Remember too that when you have a progressive tax system, especially when there are surcharges on people making seven-figure incomes, you also have a system where for any given level of national income, the greater the inequality, the greater the government’s tax revenues. And indeed federal revenues have been rising faster than median wages for decades now, thanks to the rich getting ever richer.

    Given the government’s insatiable appetite for cash, it’s only natural that it would prefer to tax plutocrats, spending some of that money on poorer Americans, rather than move to a world where poorer Americans earn more (but still don’t pay that much in taxes), and the plutocrats earn less, depriving the national fisc of untold billions in revenue….

  10. The creditors call in all the debt when interest equals before interest equals 10% of GDP(or approximately the curent Fed budget). The feds can choose to cut spending and entitlements radically int eh next 10 years..or they can print money and destro the economy…rasing taxes at this point will cause more negative gdp growth and revenues will fall/black markets will increase.

    All of he growth in governemtn revenues have come from payroll taxes. The narrative that the rich pay all the taxes is tiresome, false and offputting to the marginalized anti-war democrats who intuitively know that it’s a lie.

    However, payroll taxes have grown from less than 9% of the government revenues to almost 40% in the last 40 years. Payroll taxes steal almost as much from the people as income taxes and the growth rates are far greater.

    Federal Revenue History

    NEO-cons love Reagan and Greenspan who doubled payroll tax rates with their bipartisian committee. The growth of the payroll tax is a blatant attack on the working poor.

    A day of reckoning is approaching before 2020.

  11. By the time the scheiss really hits the fan, I’ll either be dead or lying on a urine-soaked mattress in a Barack H. Obama Elder-Care Camp somewhere.

    1. One can only hope. :p

    2. You get a mattress?

      You lucky, lucky bastard.

      1. To be fair, it’s a mattress that was handed down from Madonna to that Bernhard chick and then it belonged to Roseanne Barr for a time until she re-gifted it to Barney Frank who donated it to charity after a few years.

  12. Sad thing is, the poor are the ones who will pay for this most dearly, as either their limited wages move closer to worthless as prices for everything rise faster than their income – or many will be out of jobs, as businesses won’t be able to afford the $100/hour minimum wage.

    1. By the way, should we not be investigating how the increases to minimum wage over the past two years have contributed to the current state of joblessness? Nobody mentions it, but it wouldn’t surprise me if businesses are cutting jobs not only due to the bad economy, but due to the fact that some minimum wage jobs aren’t worth the minimum wage cost.

      1. It’s no coincidence that we have the highest rate of teenage unemployment (25%+) that we’ve had since keeping records… Teens, obviously, are among the least employable group so minimum wage hikes disproportionately effect them.

        1. Why employ teens? The only reason that there is: they’re cheap and they’ll work for that little. When I was 16, I saw my first pay check over a couple hundred dollars and I thought I was in heaven.

          Take away that cost advantage and why would you ever hire teenagers? I, like most (all?) of my friends, wasn’t exactly reliable, stable, or career orientated at 16.

  13. What — no video clip of Muskie?

    You’re slipping, Gillespie.

  14. The miracle of compound interest.

  15. I wish we’d do a legitimate default on all this debt and stick it to our government’s creditors instead of our currency holders. Has that ever been done before?

    1. It’s called inflation. The US cannot default on its debt any other way without destabilizing the banking system, destroying the dollar, and ruining the economy for decades to come. The inflation that we need will be bad enough.

  16. did anyone else notice that if you read off the values from the far right hand axis of the graph (using the alternate scenario) it totals to over 50% of GDP. they really think that more than 50% of GDP can be spent on interest, SS, and Medicare? that implies tax rates of 100%, so no, this wont happen. repudiation of our national debt through sustained moderate inflation is far more likely.

    1. Sustained inflation, yes. Moderate? Simply not possible given the sheer magnitude of our indebtedness.

      I think I’m gonna start putting posters over those stimulus signs where it says: Funded by the American Recovery and Reinvestment Act and replace that tiresome ARRA/Obamamercial with “Funded by the Government of China and your Grandchildren’s Labor.” Anyone with me?

      1. sure it can be moderate, it will just take longer.

        1. Okay, so I have a question for you. I’m old enough to remember the ’70’s. I just don’t see that kind of inflation going on.

          How come it doesn’t seem like we’re seeing much inflation right now? Seems like they’d have already turned it on.

          And I assume they can actually turn it on and off, more or less at will.

  17. That implies tax rates of 100%, so no, this wont happen. repudiation of our national debt through sustained moderate inflation is far more likely.

    Clearly, the plan is to do a slo-mo repudiation through devaluation of the dollar and inflation. Two thoughts:

    (1) Anyone who thinks that they can “control” inflation at a level that is simultaneously high enough to repudiate debt and not damage the economy is an idiot.

    (2) More and more of our creditors are demanding inflation-protected securities, which negate this strategy. They aren’t fools, and they increasingly have the whip hand. Further, much of our debt is in relatively short instruments, which will have to be rolled over in an inflationary environment. What do you think the interest on those is likely to be? Less than inflation, or higher?

    1. RC, I know we have tangled over this issue before, and despite our differences of opinion, I judge you to be one of the better posters on this site about these issues. So I disagree with your statements:

      1) Inflation damages the economy – fact. 14% inflation for 10 years is just as bad as 7% inflation for 20 – not true at all. Inflation that is moderate and predictable and steady is much kinder than unpredictable and poorly measured (or delibrately obscured) inflation. Both are damaging, but higher is worse by far. There is no reason to think that inflation cannot be steady at a moderate level. Many economies exhibit that.

      2) TIPS. Ah yes, I make my living trading them. TIPS issuance as a percentage of treasury issuance has remained steady or actually declined. Whether investors want them or not is highly debated within the linker market, but the fact are that TIPS are a tiny tiny market populated by individual investors, some savvy pension funds, a few large macro funds, and a bunch of wiseguy hedge funds who make their bread by grinding the bones of stupid dealers.

    2. One more point. Inflation of ANY type can only repudiate the debt we have already ammassed. Any new debt will incur a much higher interest rate as a result of inflation once it has begun. Therfore, we need to balance our budget BEFORE moderate inflation happens. Likely? Not very.

    3. domo, good to see you back.

      I’m surprised that TIPS volume hasn’t gone up – I was going off of news stories about the Chinese making noise about wanting more TIPS.

      You sound more sanguine than I am that the government can deliberately embark on a policy of devaluing our currency at a rate that makes a meaningful dent in our debt obligations without having that devaluation run out of control. I agree that 7% for 20 years isn’t as bad as 14% for 10 years. I just don’t think that there’s much chance that, once we start down the road of, say, 7-9% inflation as a matter of deliberate policy, we will be able to hold it at that level.

      There is absolutely no chance whatsoever that we balance the budget before inflation kicks in. The official, and therefor likely optimistic projection, is for roughly $1T deficits for the next several years at least. We’ll be creating debt, and rolling over low-interest debt into an inflationary environment, make no mistake. Some of what we roll over may be partially repudiated when we roll it over, true.

      1. I’m more sanguine than you about the fed’s ability to hold inflation at a given level, but I’m not at all hopeful we will balance the budget – therefore the argument is somewhat academic.

        At the very least, the treasury can borrow a big raft of dough, enough to finance the porkulus and perhaps a few years of the inevitable healthcare boondoggle before higher rates start choking off our ability to borrow ever increasing amounts. We will have to see negetive real interest rates in a relative flat yield curve before that happens though. I give it 5 years.

        1. Academic, indeed guys…

          The idea that politicians will somehow manage to balance the budget and cease depending on borrowing from other nations to pay for their various projects is a monumental and possibly insane assumption.

          Health Care Reform… Continued war… Escalations in bureaucracy everywhere… I dunno. I’m a bit more pessimistic. There’s no way they won’t keep trying to borrow until the rest of the world quits loaning us any money

          Then………….. Problems.

        2. Academic, indeed guys…

          The idea that politicians will somehow manage to balance the budget and cease depending on borrowing from other nations to pay for their various projects is a monumental and possibly insane assumption.

          Health Care Reform… Continued war… Escalations in bureaucracy everywhere… I dunno. I’m a bit more pessimistic. There’s no way they won’t keep trying to borrow until the rest of the world quits loaning us any money

          Then………….. Problems.

  18. I swear to you, I didn’t double-post that. Squirrels.

  19. Hey, I posted this graph somewhere, and people jumped on it, saying that it claims to represent CBO data, but that the CBO data is limited to 2019. Any explanation?

    1. Here is the CBO data. http://www.cbo.gov/ftpdocs/102…..5-LTBO.pdf
      It’s the long term projection data from CBO and the data is available on their website.

  20. This happy hour is going to be awesome! It looks like a strong crew of DC Forum for Freedom students are going to be heading up to represent Students For Liberty!
    San Diego Podiatrist

  21. Hey, I posted this graph somewhere, and people jumped on it, saying that it claims to represent CBO data, but that the CBO data is limited to 2019. Any explanation?
    Bankruptcy San Diego

  22. all work for anything. Many of the proxies posted on here have alot of popups or anoying adware and the displayed website is all messed up. This proxy shows the webpage as is, the only ads are on the main page

  23. I’ll bookmark your site and have my friends check up here often. I’m quite sure they will learn lots of new stuff here than anybody else. Thanks for sharing and keep up the good work

  24. Sustained inflation, yes. Moderate? Simply not possible given the sheer magnitude of our indebtedness..I think I’m gonna start putting posters over those stimulus signs where it says: Funded by the American Recovery and Reinvestment Act and replace that tiresome ARRA/Obamamercial with “Funded by the Government of China and your Grandchildren’s Labor.” Anyone with me?

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