Here is what our future looks like if we don’t cut spending dramatically.
This chart slices government spending into four main areas: Social Security, Medicare and Medicaid, interest on the debt, and other spending (which includes defense). As we can see, if we don’t get our deficit and spending under control, most of our budget will be used to finance the interest we owe on our debt. Note how this share of the spending grows significantly faster than the Medicare and Medicaid part. That being said, the best way to reduce the amount of interest we pay on our debt is to reduce spending on other fast-growing budget items, i.e. entitlement spending.
And this is the best-case scenario. The CBO alternative projects an average interest rate of 4.6 percent from 2010 to 2084, with lower rates in the near future due to the recession. Interest rates in 2010 are estimated at 2.26 percent, slowly increasing through 2030 and leveling off at about 4.9 percent. These projected rates are historically low for the United States. What’s more, these interest rates assume that investors look at these spending projections and don’t change their perceptions of the country’s solvency.
Tell it to the "We fooled you before, and we can fool you again" crowd in California: External Link
Reply to this commentLinkReport AbuseWe are heaping huge debt obligations on people who have yet to be born, without their consent.
What the hell have we done?
Reply to this commentLinkReport AbuseI'm not optimistic about the debt, but this graph looks a bit too much like the "hockey-stick" climate prediction for my liking.
Conversely, the short-term portion of the graph (2010-2016) looks a bit too optimistic....
Wargaming with strange assumptions, maybe?
Reply to this commentLinkReport AbuseDoes anyone remember the Dems screaming about Bush's deficit spending? And now it's not uttered from their lips? Good golly, what have we done to ourselves electing such a bunch of crooks, both Dems and Reps...
Reply to this commentLinkReport Abuse@ef,
the graph is actually very consistent with compound interest. If anything it may underestimate the effects of the debt. The assumptions of growth may not be realized and then the graph will look much worse.
This is why we need entitlement reform and drastic. If it means I will lose my SS and Medicare so be it. I have time to prepare for these events. We all need to do it.
Reply to this commentLinkReport AbuseWhat changes are presumed on this graph? I'm thinking this graph must represent what the CBO thinks will happen if there are no changes to the budget, apart from the ones that are already signed into law. Are they presuming no economic growth? Or are they presuming Congress will spend whatever extra tax revenue is produced by a recovering economy?
Whatever the calculations, it's a scary graph for our children and grandchildren.
Reply to this commentLinkReport AbuseRepublicans have no ability to shrink government spending. Here is why.
Reply to this commentLinkReport Abuse@weew: What's this "we" stuff kemosabe? I sure didn't vote for any of this. I am sadly provider of tax revenue, not a consumer. One of my biggest frustrations is that not only do I keep voting against this kind of spending; my candidates keep winning--and I _still_ get more of the same.
Reply to this commentLinkReport AbuseHey Hogtown, do you remember former Democratic Senator Jim Sasser constantly talking about the "dafacit", as he called it? That word is thus seared in my mind.
Reply to this commentLinkReport AbusePoliticians interest in any issue is directly related to which end of the "club" they're on - if they're swinging the club, it's a big deal; if they're on the receiving end, it isn't.
Entitlements are on auto-pilot; discretionary spending is on a "baseline" which assumes increased spending; the constituency which wants to see spending on any particular program cut is smaller & less intense than the people who WANT THE MONEY!!!!!
There's a systemic problem here.
Reply to this commentLinkReport AbuseThe average Federal bureaucrat looks at that graph and thinks "Success!".
Reply to this commentLinkReport Abuse"What the hell have we done?"
Reply to this commentLinkReport AbuseQuite frankly I don't believe WE'VE done anything. "THEY" have ignored the will of the people for 20 years with their Utopian ideals, FDR's '2nd bill of rights', every has the right to own a home bs (thanks Bawney). It's time "THEY" are shown the door, or perhaps a short drop and a sudden stop. The majority of the 'problem children' are still in DC, waiting to spend more.
No more Constitutionally non-mandated spending until this problem is fixed . . . that means for years.
That's my feeling on it . . . going John Galt myself, as I'm now fun-employed.
Historically, the Young have helped the Old, partly out of family love, and partly because of a transfer of wealth from the Old to the Young. The Young have been paid for their services, to the extent they have worked for the Old.
Our politicians have now built a scheme where the Young will be expected to work for the Old, for nothing. The Young will be ordered to pay the amounts promised by Medicare, Social Security, and union and government pensions, lavish healthcare promises, and lavish pensions.
There is nothing real in the "Social Security Trust Fund". There is only a political promise to find the money somewhere that has already been spent. This is 1000 times bigger than the Bernie Madoff fraud of $50 billion. It is a gigantic Ponzi scheme pretending to be a sensible government program. Collecting more tax for that scheme will not change anything.
The Old will wave pieces of paper at the Young calling for perfectly legal, high taxes on them. This will be presented as a given, the amount of transfer duly voted under law by the Old for the benefit of the Old.
In exchange, the Young will be told that they too can collect from their children in turn. The Young will be slaves to the Old, under the suggestion that they too can enslave their Young.
If the Young have any sense at all, they will tear up those pieces of paper in contempt for the Old who decided to enslave them. The Young will have contempt for the government and "the Law" that arranged this enslavement. They will break the Ponzi scheme of Social Security. They will blame the government that pretended to plan for the future, but instead spent it all, expecting the Young to supply what was never saved.
There will be a revolution that changes much of our current law. Government bonds, then refered to as the "old government bonds" will be worth the paper they are printed on.
--> Ponzy Schemes Like Social Security
Reply to this commentLinkReport AbuseThere is nothing real in the "trust fund". There is only a political promise to find the money somewhere that was paid in and already spent. The shortfall is about $15 trillion in today's dollars, about the entire yearly income of everyone in the US.
Compound the state / country / city / school district / household loads in with mess...
You can start to see the intentional drive to inflate by the freaks. If you have no intention of cutting spending and have no long-term control over the i-rates, just change the unit of measure; we'll all be millionaires. I so damned glad I hung on to that wheelbarrow.
Reply to this commentLinkReport AbuseIts even worse that the chart representation...our FED is now creating money out of thin air, in order to buy up our treasury debt. This will only end up causing a loss of confidence in our currency. Think you'll escape? No way, we'll all be in the same boat come 2012. It will be more than ugly - for everybody in the whole country.
Reply to this commentLinkReport AbuseI'm not optimistic about the debt, but this graph looks a bit too much like the "hockey-stick" climate prediction for my liking.
Nope, compound interest will do that. It's just math.
Reply to this commentLinkReport AbuseOJFL: Compound interest charts are not created with the interest as a percentage of your salary as the Y-axis.
Reply to this commentLinkReport Abuse"We are heaping huge debt obligations on people who have yet to be born, without their consent. What the hell have we done?"
Set up conditions for a debt default, of course. It is not like those people will actually pay it. Nor should they.
We will have our fun, and our kids will shrug at our request to pay for it. Properly so.
Reply to this commentLinkReport AbuseThe Old will wave pieces of paper at the Young calling for perfectly legal, high taxes on them. This will be presented as a given, the amount of transfer duly voted under law by the Old for the benefit of the Old.
In exchange, the Young will be told that they too can collect from their children in turn. The Young will be slaves to the Old, under the suggestion that they too can enslave their Young.
If the Young have any sense at all, they will tear up those pieces of paper in contempt for the Old who decided to enslave them. The Young will have contempt for the government and "the Law" that arranged this enslavement. They will break the Ponzi scheme of Social Security. They will blame the government that pretended to plan for the future, but instead spent it all, expecting the Young to supply what was never saved.
There will be a revolution that changes much of our current law. Government bonds, then refered to as the "old government bonds" will be worth the paper they are printed on.
Reply to this commentLinkReport AbuseOne way for the Federal government to eliminate the interest expense is to stop the fiction of borrowing to pay for spending, a system left over from the days of the gold standard, when borrowing was required to ensure an adequate supply of gold to back up the currency. Now that the dollar is a completely sovereign currency all the Federal Government is technically required to do to fund operations is deposit a check with the Fed (i.e. ask the fed to make an electronic entry in the Federal Government's account.) This would certainly save interest costs but would have the negative effect of reducing the interest income portion of the economy.
I suggest a review of the material on Modern Money Theory. This talk by Stephanie Kelton, (Associate Professor of Macroeconomics, Finance, and Money and Banking, University of Missouri – Kansas City. ) entitled "Are There Spending Constraints on Governments Sovereign in their Currency?" Would be a great place to start. Here's the link: External Link
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