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Play the math game or just read the CBO report issued in conjunction with the Fed. In 2012 they concluded each 1% increase would add $130 billion per year over 10 years.
We are currently 3% below the historical average. That's almost $400 billion a year less in interest expense over ten years. That is $4 trillion. Trillion with a big "T". Check mate.
Last edited by TrapperJohn; 04-04-2013 at 04:23 PM..
Play the math game or just read the CBO report issued in conjunction with the Fed. In 2012 they concluded each 1% increase would add $130 billion per year over 10 years.
We are currently 3% below the historical average. That's almost $400 billion a year less in interest expanse over ten years. That is $4 trillion. Trillion with a big "T". Check mate.
Not only that, but increases in interest rates generally mean there's been an increase in economic activity and thus an increase in tax revenues. As the CBO itself put it:
...It is important to note that the estimates in Table 2 do not account for the effects on the federal budget of other differences in economic conditions that would probably accompany higher interest rates. For example, interest rates could be higher than in CBO’s baseline because inflation could be higher than CBO anticipates. Indeed, inflation was higher during the 1990s, and much higher during the 1980s, than CBO projects for the next decade: Inflation as measured by the consumer price index averaged 5.1 percent annually during the 1980s and is projected by CBO to average 2.2 percent over the coming decade. If CBO assumed that inflation over the next decade matched the average seen during the 1980s, to parallel the assumption about interest rates, projected tax revenues would be much higher than in CBO’s baseline projections, and federal spending would be moderately higher. On balance, those two effects would reduce deficits...
Even assuming modest GDP growth of 2% a year, there would be a corresponding increase in tax revenues to a net of over 20%/year by the end of that 10-year-period. Considering that US government revenues for 2012 were somethingly like $2.7 trillion that would result in an increase in tax revenues by the end of that 10-year-period of over $600 billion a year (to roughly $3.3 trillion a year) - which would MORE than cover all but the worst-case scenario (which is VERY unlikely) laid out - and even THAT scenario could very well reduce the deficit. The net result is that interest rate rises would have little or no impact on the deficit because they would be more than offset by increases in tax revenues.
Finally there remains the fact that once the deficit is reduced significantly - and we are MOVING in that direction - there's less NEED to borrow so decision of how much to borrow (if ANY) would become a CONCIOUS decision rather than a need - and if the rate of return becomes too, high the Treasure could simply reduce the number of bonds sold (or even - though very unlikely - not sell any at all).
The mistake you folks continue to make is that you are assuming that the sky-high deficits of the last few years are a perminant, non-reversable thing - and that's just NOT the case. Those were temporary spikes caused by 2 things - #1) the HUGE drop in tax revenues after the 2008 economic collapse, and #2) The big spike in government spending in response.
In the case of #1) - tax revenues are back to the pre-recession levels (and are CLIMBING). Nearly half of the increase in the deficit was NOT a result of increased spending, but the decrease in revenues. As revenues increase that part of the deficit is going away - hence the BIG drop in the deficit that we've already seen.
In the case of #2) - despite the fact that you seem focused on the Stimulus as the cause of the big increase in spending, that's just not the case. First off, a third or so of the Stimulus was TAX CUTS (you know? what you folks are always calling for?). Aside from that, the Stimulus is not an ongoing year after year type thing stretching indefinitely into the future. Secondly, the other major componant of the increase in spending had to do with the HUGE increase in unemployment payments - and that's now ebbing. Together the return to "normalcy" will result in a marked decrease of deficits back towards pre-recession levels (and likely less with the new tax rate increases and spending cuts).
Ken
Last edited by LordBalfor; 04-04-2013 at 05:01 PM..
After reading through the insightful posts on this thread (and wading through all the useless ones), I've come to the conclusion that both Obama and Bush were terrible presidents and that neither the Republican nor Democratic parties have the best interests of the general public at heart.
Obama is still in the white house, so the jury is still out on his cumulative effects on the country.
Wow, do you really think this is only suddenly now taking place because a black man has entered the White House? Yeah, I know you didnt say black, but given thats the only difference between now, and a few years ago, what else could we conclude this sudden change you now claim is happening that wasnt happening a few years ago?
I'm not sure what you mean? We had our largest housing bubble ever in this country before the economy tanked... While the rest of the developing world was.... well developing modern economies at a brisk rate.
You're at least consistent. Incorrect. But consistent. I can respect that quality.
As mentioned - what's incorrect? I'm referencing the CBO (as were you) and their analysis of interest rate changes on the deficit. It's pretty clear-cut. The deficit is falling and revenues are rising - those are simple facts.
Play the math game or just read the CBO report issued in conjunction with the Fed. In 2012 they concluded each 1% increase would add $130 billion per year over 10 years.
We are currently 3% below the historical average. That's almost $400 billion a year less in interest expense over ten years. That is $4 trillion. Trillion with a big "T". Check mate.
That much? Then why is that fraud Ryan putting through his plan that increases spending by 3.4 percent? Does he expect big growth to counter that spending?
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