By 2035, under this scenario, federal spending would account for almost a third of the U.S. economy, and federal debt held by the public will have risen from the present 60% of GDP to an astounding 185 percent.
But wait. It gets worse. When the government pays its bills by borrowing, the funds it borrows "crowd out" productive private investment. CBO projected that federal debt would increase to 188% of GDP by 2027. The CBO's model gave up at 2027 because the curve was heading straight up.
And don't forget the tax dollars required to pay the interest on federal debt. At the present $15 trillion debt level and 3% average yield, we will pay on the order of $450 billion next year to service the debt. That annual burden will triple by 2027.
David Walker CPA served for ten years as the U.S. Comptroller General. There is probably no one person in the country who has a better grip on what these fiscal facts mean for Americans, especially the younger generations.
In his new book Comeback America, Walker writes "if we don't wake up, the next crisis could be much worse. What if we went into it with even greater budget and current accounts deficits? These measures [interest rate cuts, bailouts, stimulus spending] worked this time because the world still trusts in the strength of the dollar and the safety of U.S. bonds. But what if trust in the United States erodes? In that dismal event, our economy would face skyrocketing interest rates at best, and at worst a flight from the dollar to the euro or the yen. If that happens, farewell to America as the world's economic powerhouse."
David Walker will speak at an Ethan Allen Institute program at the Sheraton Burlington Thursday, Aug. 19, from 9-noon. His topic is the subtitle to his book: "Turning the Country Around and Restoring Fiscal Responsibility".
Vermonters concerned about the fiscal storm facing their children and grandchildren in the years ahead may want to attend.
John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).