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The Best Part Of Waking Up Is Hot DOOM! In Your Cup | Main | BREAKING: At Least 25 Wounded In Terror Attack In Jerusalem UPDATE: At Least One Dead
March 23, 2011

Monty's Doom Log: Supplemental

Monty mentioned that Paul Ryan's roadmap for debt reduction takes several decades to get us back to where we were a few years ago. Here are the actual numbers.

If you want to pay down the debt to where we were at the end of FY10 (that's about 6 months ago), Ryan's plan will take 55 years.

Ryan's plan is hampered by his strategy to limit government revenues to 19% of GDP. The National Committee on Fiscal Responsibility and Reform's plan (i.e., the plan submitted by Obama's debt reduction committee) allows government revenues to rise to 20.6%, so their plan "only" takes 12 years to pay off this year's debt.

Of course, the higher government revenues mean higher taxes & fees, which likely means slowing of economic growth. so the plan submitted by Obama's commission is probably far too optimistic. But neither plan is realistic, even with optimistic assumptions. Believing that the government can hold to a long-term course of fiscal austerity, and that no other economic crises or setbacks will occur in a decades-long timespan, is completely fanciful. And as you can see from Monty's post below, the assumptions about future interest rates on our debt may be invalidated within a year, let alone a decade.

With just this year's spending, President Obama, Henry Reid, and Nancy Pelosi have saddled us with debt that we will probably never pay back, and the White House budget (even before the CBO corrections) agrees. It doesn't even try to pay back these deficits - in fact it doesn't even balance the budget. Ever.

In my opinion, we have to abandon the notion that any of the proposed plans are going to address the federal debt problem. Think instead of the reality that your children and grandchildren are going to live in a country with much lower economic growth than we've enjoyed in the past.

This is not to say that Ryan's plan is completely useless - it does slow the rise in the debt/GDP ratio, perhaps giving us time to implement a faster plan before some disaster scenario strikes.

Closing Question: How much would you have to cut the federal budget to get back to the FY08 debt/GDP level within 10 years?
Answer: ~ 35%

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posted by Geoff at 10:21 AM

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