Wednesday, February 17, 2016

Beware the Debt

For John, BLUFDeficit is the annual problem, Federal debt is the accumulation of all the deficits.  Nothing to see here; just move along.

In a recent Blog Post by Mr Jim Peters, the issue of Keynesian Economics came up and the problem of the eventual federal debt.  The title is "Meanderings".

As this chart from the Committee for a Responsible Budget shows, ten years from now the interest on the Federal Debt will dominate the budget.

Here is a chart of deficit spending.  Over on the left we seen Federal Annual deficit rising out of the budget surplus from the end of the Clinton Years.  It spikes as we try Keynesian Economics to stimulate the Economy, and then comes down, only to be projected to go up again in the out years.

For the non-partisan Congressional Budget Office look at the new budget, check here.  Net Interest is discussed on pages 86-90.

Regards  —  Cliff

  That is, unless the Federal Government comes up with an accounting trick to avoid the trap.  The problem is, most of those tricks involve things like negative interest rates and hair cuts.
  Net Interest is defined by CBO thusly, "Net interest outlays are dominated by the interest paid to holders of the debt that the Department of the Treasury issues to the public.  The Treasury also pays interest on debt issued to trust funds and other government accounts, but such payments are intragovernmental transactions that have no effect on the budget deficit.  Other federal accounts also pay and receive interest for various reasons."

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