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Tom Woods and Gene Epstein Discuss US Debt (aka: Our Fiscal Road to Hell)

Summary:
Earlier this month, the Congressional Budget Office released a 55-page report on the long-term US budget outlook. Basically, it concluded what we already know: the US government is on a fiscal road to hell.The federal debt currently stands at the highest level since shortly after World War II. But that’s not the worst of it. If the US government maintains current policies and economic trends continue, the debt will likely double over the next 30 years, rising to about 150% of GDP. CBS News characterized it as a ‘bleak report‘:The biggest expense facing the federal government in the coming years isn’t Social Security, Medicare, or military spending. It’s the interest on the debt. And that will only increase if the Federal Reserve ever gets around to normalizing interest rates. The CBO

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Tom Woods and Gene Epstein Discuss US Debt (aka: Our Fiscal Road to Hell)

Earlier this month, the Congressional Budget Office released a 55-page report on the long-term US budget outlook. Basically, it concluded what we already know: the US government is on a fiscal road to hell.

The federal debt currently stands at the highest level since shortly after World War II. But that’s not the worst of it. If the US government maintains current policies and economic trends continue, the debt will likely double over the next 30 years, rising to about 150% of GDP. CBS News characterized it as a ‘bleak report‘:

The biggest expense facing the federal government in the coming years isn’t Social Security, Medicare, or military spending. It’s the interest on the debt. And that will only increase if the Federal Reserve ever gets around to normalizing interest rates. The CBO highlighted two factors it expects will continue driving debt service costs higher:

On a recent podcast, Tom Woods talked with Gene Epstein about the CBO report. Woods made the point that it’s easy just to ignore CBO projections, or blow them off as unrealistic hysterical predictions. After all, the CBO has been issuing the same warning for several years, and we haven’t seen any doomsday scenarios playing out before our eyes – at least not yet. So, by-and-large, the mainstream simply ignores these annual reports.

But Epstein said this is really just the calm before the storm. And while policy changes could kick the can down the road, or even possibly reverse the government’s fiscal direction, the current situation certainly warrants concern.

Woods and Epstein break down the CBO report pretty thoroughly, take apart Paul Krugman’s arguments relating to CBO projections, and even offer some potential solutions to the problem. As a bonus, Epstein explains the difference between a good Keynesian and a bad Keynesian.

The bottom line is the US is on an unsustainable financial path. When even a mainstream government organization like the CBO recognizes the problem, you know it must be real. There is still time to reverse course, but knowing politicians have a future horizon that doesn’t extend much beyond the next election cycle, doesn’t warrant much faith. It seems unlikely they will take the steps necessary to divert us from the fiscal road to hell.

 

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