Tag Archives: Federal Debt Interest

More Frightening CBO Forecasts from THE BUDGET AND ECONOMIC OUTLOOK: 2015 TO 2025

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rp_Slide1-300x225.jpgThe following quotes were taken from the CBO’s Jan 15 report, found here. They continue warning America that if our country doesn’t change the fiscal course that it’s on under excessive tax and spend policies, our country is headed for a disaster. We need to stand up, get vocal, vote out the spenders and force our elected officials to balance the federal budget, before the mounting $ trillions that we owe dooms us!

CBO:

  • Beyond 2017, real (inflation-adjusted) gross domestic product (GDP) will grow at a rate that is notably less than the average growth during the 1980s and 1990s.
  • Cumulative deficits over the 2016–2025 period are projected to total $7.6 trillion.
  • Outlays rise-to more than 22 percent in; Four key factors underlie that increase:
    • The retirement of the baby-boom generation
    • The expansion of federal subsidies for health insurance
    • Increasing health care costs per beneficiary
    • Rising interest rates on federal debt
  • CBO projected under current law, debt would exceed 100 percent of GDP 25 years from now and would continue on an upward trajectory thereafter;a trend that could not be sustained.
  • Such large and growing federal debt would have serious negative consequences, and are unsistainable.
  • Interest rates on Treasury securities, which have been exceptionally low since the recession, will rise considerably in the next few years.
  • Outlays for the federal government’s major health care programs will increase by $82 billion (or nearly 10 percent) this year
  • Net interest payments increase from $227 billion, or 1.3 percent of GDP, in 2015 to $827 billion, or 3.0 percent of GDP, in 2025.
  • Gross federal debt is projected to rise by $9.5 trillion over that period and to total $27.3 trillion at the end of 2025.
  • The Long-Term Budget Outlook: Beyond the coming decade, the fiscal outlook is significantly more worrisome,public debt would exceed 100% of GDP by 2039.

The following 3 charts were pulled from CBO’s supporting analysis, and show the Federal Budget’s, and America’s future if significant changes aren’t made to control mandatory spending.

Chart 1

Chart 1

Chart 2

Chart 2

Chart 3

Chart 3

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Top 10 Winners in President Obama’s FY16 Budget

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IMG_0533President Obama unveiled his 2016 BCA busting budget on Monday at the DHS Headquarters. The President extolled the virtues of his budget cutting, stating that he reduced annual deficits by two thirds since coming into office. Let’s examine that statement.

  • President Obama’s starting point was the largest deficit in American, and probably world, history, at over $1.4T in 2009.
  • In absolute terms, he signed the largest tax increase in American History, so he did raise more money by taking it from the American people.
  • Despite the ever-growing threats to our national security, he did substantially cut the US Military.
  • He also increased spending in many social programs and wealth redistribution programs, which more than compensated for defense cuts. The Budget Control Act of 2011 capped his spending increases. The BCA was the real control on spending, and it was thrust upon him when the American voters gave the GOP control of the House.

Now let’s take a look at where the budget increased the most. The Top 10 Largest Increases in FY16 (based upon dollars) – Where possible, color-coding has remained consistent with analysis of Social Programs/Wealth Redistribution.

– The 2015-2016 Delta column is a pure dollar comparison between FY15 and FY16. The % Delta column is added to show the magnitude of the increase compared to total program costs. Similar data is also presented for these same Top Ten comparing growth from 2007 (President Bush’s last pure budget) in purple to President Obama’s 2016 budget. What’s startling is that the combined growth of the top 5 programs in Chart 1 equals nearly $1.1T. That amount of annual growth alone is equal to the entire discretionary portion of the Federal Budget, including the Department of Defense.

2016 Predbud Top 10 Largest Growth Programs

Not surprisingly, the largest FY15 to FY16 increases are, interest and social programs. The defense increase follows two years of significant budget cuts despite an ever more dangerous world.

Also, Immigration Reform (highlighted in Red), totaling $8B, never existed before in the Federal Budget. The President is adding a brand new subfunction, despite the uproar and accusations of illegality over his executive amnesty. Without question it’s an in your face message to the new GOP majority, and unlikely to survive congressional budget hearings.

Eight CBO Forecasts On America’s Future

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Liberty loving Americans standing against reckless government spending.

Liberty loving Americans standing against reckless government spending.

In July, 2014 the Congressional Budget Office released its latest annual forecast on America’s economic future, “The 2014 Long Term Budget Outlook“.

Some key assumptions foretelling how high future interest rates will be on money the federal government, really the American tax payers, must pay are less than inspiring, in fact they are all bad news. These assumptions add to previous depressing CBO assumptions.

Per the CBO, four factors that will REDUCE future interest rates on $ borrowed by the Federal Government (the lower the better):

– The labor force is projected to grow much more slowly than in the past (1990-2007). (Slow labor growth means America’s ability to grow its tax base is weakened).
– The share of total income going to high income households will remain higher in the future (i.e. Fewer will share in the “American Dream”).
– Total factor productivity will grow slightly more slowly than in the past. (Less productive workers means less products and services).
– The risk-premium will probably remain higher than in the last few decades (i.e. Investors will find US Treasuries more attractive since they will be afraid of higher risk investments).

Per the CBO, four factors that will INCREASE future interest rates on $ borrowed by the Federal Government:

– Federal debt, unless things change, will be much larger relative to GDP than it was in the past. Click here for chart of America’s projected federal debt.
– Net inflows of capital will be less (i.e. There will be less foreign investment in the United States, which means less growth in businesses).
– The capital share of income will remain higher than historic averages (i.e. Those that have money to invest will keep more of the resulting income).
– The working population will get older, and have fewer people in their prime savings age (i.e. Less $ will be saved, and less $ will be available for investment).

This future isn’t set in stone, fixing it requires real leadership, a long-term commitment to smaller, less intrusive, and more effective government that stops excessive taxation of Americans. Upcoming posts will look at the details within CBO’s numbers.

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