South central kansas |
Along the lines pension funding problems, there is also the case of the federal government future and existing promises. from John Cochrane blog. https://johnhcochrane.blogspot.com/2018/02/deficits.html
"Here, Jeff adds up the promises made each year for spending over the next 75 years. Others, including Larry Kotlikoff, make the same point by discounting the future payments, to estimate that the actual debt -- the present value of what the US owes less what it will take in -- is between $75 trillion and $200 trillion -- much more than the $20 trillion of actual GDP. I've been one of those guys wandering around with a sign "the debt crisis is coming" so long that I forget to reiterate the point on occasion, and Jeff rightly points out my graph taken alone could be so misinterpreted.
In a nutshell, the problem is this: The US has accumulated a huge debt. Interest costs on that debt are already in the hundreds of billions per year. If interest rates rise, those costs will rise more. $20 trillion of debt times 5% interest rate is $1 trillion extra deficit, or even faster-rising debt. Unlike the case after WWII, when the spending was in the past, the US has also promised huge amount of spending in the future.
And, as Jeff points out, this did not start in 2008. Entitlements have grown and crowded out regular spending. Now they are growing to crowd out interest payments. Soon they will grow more"
.
Edited by zenfarm 12/23/2018 10:30
|