Doc110 Loc: York PA

CBO: Debt Headed to 103% of GDP; Level Seen Only in WWII; 'No Way to Predict Whether or When' Fiscal Crisis Might Occur Here

http://cnsnews.com/news/article/terence-p-jeffrey/cbo-debt-headed-103-gdp-level-seen-only-wwii-no-way-predict-whether

Testifying in the U.S Senate yesterday, Congressional Budget Office Director Keith Hall warned that the publicly held debt of the U.S. government, when measured as a percentage of Gross Domestic Product, is headed toward a level the United States has seen only once in its history—at the end of World War II.



To simply contain the debt at the high historical level where it currently sits—74 percent of GDP--would require either significant increases in federal tax revenue or decreases in non-interest federal spending (or a combination of the two).



Historically, U.S. government debt as a percentage of GDP hit its peak in 1945 and 1946, when it was 104 percent and 106 percent of GDP respectively.


In 2015, the CBO estimates that the U.S. government debt will be 74 percent of GDP. That is higher than the 69-percent-of-GDP debt the U.S. government had in 1943—the second year after Pearl Harbor.

By 2039, CBO projects, the debt will increase to 101 percent of GDP and by 2040 to 103 percent GDP.


At that point, Hall told the Senate Homeland Security and Governmental Affairs Committee, the “debt would still be on an upward path relative to the size of the economy.”



While the run up in debt as a percentage of GDP in the 1940s financed a global war against N**i Germany and Japan that ended with an allied victory, the current run toward unprecedented debt is based on projected increases in mandatory federal spending for entitlement programs. These include Social Security, Medicare, Medicaid and Obamacare subsidies.


“Mainly because of the aging of the population and rising health care costs, the extended baseline projections show revenues that fall well short of spending over the long term, producing a substantial imbalance in the federal budget,” Hall said in his written testimony.


“As a result, budget deficits are projected to rise steadily and, by 2040, to raise federal debt held by the public to a percentage of GDP seen at only one previous time in U.S. history—the final year of World War II and the following year,” he said.


“Moreover,” he said, “debt would still be on an upward path relative to the size of the economy. Consequently, the policy changes needed to reduce debt to any given amount would become larger and larger over time.

The rising debt could not be sustained indefinitely; the government’s creditors would eventually begin to doubt its ability to cut spending or raise revenues by enough to pay its debt obligations, forcing the government to pay much higher interest rates to borrow money.”



Eventually, the nation would face a crisis—with wary investors demanding “much higher interest” rates to buy U.S. government debt.



“How long the nation could sustain such growth in federal debt is impossible to predict with any confidence,’ testified Hall.

“At some point, investors would begin to doubt the government’s willingness or ability to meet its debt obligations, requiring it to pay much higher interest costs in order to continue borrowing money.

“Such a fiscal crisis would present policymakers with extremely difficult choices and would probably have a substantial negative impact on the country,” he said.



“Unfortunately, there is no way to predict confidently whether or when such a fiscal crisis might occur in the United States,” he said. “In particular, as the debt-to-GDP ratio rises, there is no identifiable point indicating that a crisis is likely or imminent. But all else being equal, the larger a government’s debt, the greater the risk of a fiscal crisis.”

Simply keeping the debt in check would require significant changes in federal policy that would hit Americans in the pocketbook.



“Just holding federal debt at its current high level of 74 percent of GDP in 2040 would require significant changes in tax and spending policies,” Hall testified. “The combinations of increases in federal tax revenues and cuts in non-interest federal spending relative to current law of about 1.1% of GDP in each year for 25 years would be needed.



“In 2016, this would be a spending and/or a tax revenue increase totaling about $210 billion dollars--and then more than that in each year after that,” said Hall.

“If those changes came from increases of equal percentage in all types of revenues they would represent an increase of 6 percent relative to current law for each year between 2016 and 2040,” Hall testified.

“In 2016, for example, an average middle-income household would have to pay $750 more in taxes and more than that in each year afterwards,” he said.



“Or if the changes came from cuts of equal percentage in all types of non-interest spending, that spending each year would have to be 5.5 percent less than projected,” he said. “If the reduction was applied across the board to all types of non-interest spending, an average 65 years old in the middle of the earnings income who retires in 2016 would see a reduction of about $1,050 in his or her initial annual Social Security benefits—more than that in each year afterwards.”




“The more ambitious goal of returning public debt by 2040 to its average level over the past half century, which is 38 percent of GDP, would require more than that,” Hall said. “This would require a revenue increase and/or non-interest spending decrease totaling 2.6 percent of GDP every years.

“This means an average middle income household would have to pay $1,700 more in federal taxes in 2016 and larger amounts in subsequent years,” he said. “Or by cutting non-interest spending across the board, average Social Security benefits for a 65-year-old in the middle of the earnings distribution would have to drop by $2,400 in 2016 and by larger amounts in later years.”

lpnmajor Loc: Arkansas

This report is obviously intended to support already decided legislation, as it contains glaring flaws. The Federal Treasury currently owes the Social Security trust fund a great deal of money, money that it has borrowed over the years, giving the trust fund treasury bills as collateral. Likewise, Medicare is a "paid in" program. The withholdings for Medicare, combined with the premiums paid by recipients, is the money used to pay claims and finance the program.

This report, by not including the revenues raised for these programs, gives the illusion that TAX revenue is being used to finance those programs. SS and Medicare are self paid and self sustaining programs, but the CBO lumps the revenues collected for them, into the general funds.

The revenue reports and the Federal Budget should have the money's for these programs separated. That would show the amount of SS withholdings collected, as well as the treasury bond buy back amounts and would more accurately reflect the true status of these programs funds.

This report is an attempt to set up a "just cause" logic trail, to justify cutting benefits for current and future recipients. The simple fact is, the Congress has misappropriated public funds, by t***sferring money's collected for those programs specifically, to the general Federal revenues - and don't want to pay it back. They cannot tell the Chinese and other creditors, that they will not pay their commitments, but are willing to tell American citizens that they will not pay THEIR commitments, because they cannot afford them - instead of cutting other Federal expenditures - that might inconvenience them, their families or friends.

Bad Bob Loc: Virginia

When will the new GOPee Congress get off their ass????

son of witless

AND CUT SPENDING? Your ass wipe will veto anything constructive that they pass. You want higher taxes. Here is the dirty little secret. No matter how how much money flows into Rome DC they will always spend more.

Bad Bob Loc: Virginia

Pea Brain, Obama can't veto a bill from Congress that hasn't been written. When is the new GOPee Congress going to get off their ass?

Liberty Tree

No one knows what the real debt is because of the manipulation of data and the published debt figure has been frozen for months.

Ronald Hatt Loc: Lansing, Mich

Is there "ANYONE".....Out there, that can stop this insanity? ? ? ? ? ?

Liberals, have done a "Goot" job, destroying this "once great country'!

Thank you BATH HOUSE BARRY, & YOUR PARTY OF TOTAL DESTRUCTION, & INSANITY!......................... :shock: :arrow: :evil:

Bad Bob Loc: Virginia

:thumbup: :thumbup: :thumbup: :thumbup:

PeterS

I thought tax cuts were suppose to pay for themselves? Shouldn't the money be rolling in from all the tax cuts little Bush gave us? So why the hell are we worried about a measly 1,700 extra in taxes?

JMHO Loc: Utah

You're just flat WRONG!

Social Security receipts go into the the General Fund, and IOU (that essentially means nothing) is placed in a file cabinet. Medicare IS NOT self-sufficient...true, receipts come from employee's FICA payment, but the recipient, later in years, uses benefits that far exceed what they ever paid in. With SS, if the average recipient draws SS benefits for 7 years, they have drawn out everything they ever paid in, plus interest. Currently, 71% of the national budget goes for entitlements and servicing the debt. If, and when, the interest rates reach pre-2008 levels, interest on the national debt could eat up to a fourth of the budget by itself. Currently, the treasury coffers have brought in record amounts of tax receipts over the past two fiscal years, and we're still running close to $440b in deficit spending.

son of witless

Every single freakin time, every time they tried to restrain President JACKOFF from over spending he went and did it anyway. His s***es in the media brain washed the low information v**er into thinking that any restraint in deficit spending was draconian.

So do not give me any of your usual Obama manure. We all know that your side is for more spending. The only spending you guys ever cut is the military. How is that workin out?

Does the World love us like you guys promised? No? Our friends do not trust us and our enemies laugh at us. ISIS, Iran, China, Russia, and Boko Harum are all on the march because Marxist Barry h**es American Power. No wonder all of that money came in from overseas to get your hero elected and reelected.

They really got their money's worth, dint they?

DamnYANKEE

:roll: :roll: :roll: :roll:

DamnYANKEE

The LIBTURD DEMS , SPENT IT , Faster than they Got it . DUH DICKHEAD ??? :roll: :roll: :roll: :roll:

DamnYANKEE

:thumbup: :thumbup: :thumbup: :thumbup: Is it time to REVOLT and REMOVE the FRAUD ILLEGAL TREASONOUS KENYA MUZZY F*GGOT TYRANT YET ??? Didn't OUR Constitution say that ?? Isnt it OUR Duty , And , OUR Right ??? :evil: :evil: :evil:

Ronald Hatt Loc: Lansing, Mich

rightie-O......bad blob.........Trump is the man for the Job!......... :thumbup: :thumbup: :thumbup: :thumbup:

{ nice to see you are finally coming around! } :lol: :lol: :lol: :lol: :lol: