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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (83)6/19/2003 11:38:49 PM
From: Biomaven   of 110194
 
Long term, entitlements are out of control, as can be seen by this forecast from the Congressional Budget Office last year:

A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075
Summary

This policy brief presents a long view of the federal government's finances and the potential impact of two critical drivers of federal spending: the government's largest entitlement programs--Social Security, Medicare, and Medicaid--and interest on the federal debt held by the public. Under the projections shown here, outlays for those entitlement programs would rise from 8 percent of gross domestic product (GDP) today to 21 percent in 2075, which would exceed the share of GDP now absorbed by all federal revenues. Even if other major categories of federal spending remained fixed as a share of GDP, the growth of those programs would push total federal spending well above the level that it has been throughout much of the post-World War II period. Left unchecked, such spending could cause major deficits to emerge, propelling the government's debt and interest expenditures to unprecedented levels. The total cost of government, including interest expense, could more than double as a share of the economy, rising from 19 percent of GDP in 2002 to 40 percent in 2075.

cbo.gov

The recent tax cuts and forthcoming drug benefit in Medicare is only going to make this outlook worse. Admittedly these long range forecasts aren't worth that much (at least on the revenue projection side), but I think this forecast illustrates a fundamental long-term problem with the US economy.

But the (remaining) 30-year treasuries seem to be saying "don't worry your head about it."

Peter
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