There are two factors which will ensure that:
(1) Shift in demographic composition, i.e. more retired workers who need Social Security Payment and MediCare expense.
(2) The tradeoff between economic growth and ballooning debt interest payment
(1) is easy to understand because the baby boomers are retiring. Their SS payment and Medicare expenses are financed by people who are currently working. Less workers to pay for expenses for more retirees. That is the disaster to come.
(2) In order to cut budget deficit, sustainable economic growth is needed. However, higher economic growth also points to higher interest rate. The US sovereign debt load is expected to reach $20 trillion by 2016. The interest payment could reach $1 trillion in case higher economic growth.
The federal budget deficit increasingly looks like perpetual, if the current loan term holds.
If the economic growth jumps, then the interest expenses on the debt will also jump, so that it will cushion any upward momentum.
The annual cost of entitlement programs is expected to rise by hundreds of billions over time, and the increase in interest expenses could add two to three hundred billions on the deficit. I guess that the Federal Reserve wants to see perpetual tepid economic growth.
Plus an angry younger generation will find ways not to foot the burden, and use the democratic party to cushion any of their responsibility, such as inflation, more government hi paying jobs, and eventually outright wealth confiscation, like Greece. It's coming, it's crooked, and it's scary, but it will happen.
The Federal Reserve has proven that deficits AND debt do not matter when you simply print both away, and additionally buy worthless assets with even more newly printed money from your shareholders (the TBTF banks) at Fantasy prices to place on a meaningless balance sheet. The key is that the Fed's "balance sheet" is imaginary...they could call it Donald Duck's Lockbox...their balance sheet is fiction just like their Maiden Lane Fantasy books.
If BRICS did not present an alternative, then Fed can continue to print with impunity. But BRICS are gradually introducing alternative currency basket to settle trade and financial transactions. China has also sign bilateral currency exchange agreement with many trading partner to prevent the disruption to international trade in case of a USD meltdown.
US/UK/France axis no longer dominate the world, as you can clearly observe. The breaking point is approaching. The US ruling elite knew this, that is why the NDAA 2012/2013 have been passed to prepare for such eventuality. Why not read about the NDAA 2012/13 during the weekend.
This perpetual budget deficit will, in my view, end with the RESET triggered by the collapse of US Dollar. During the RESET, the debt will be restructured or writeoff, the retirement saving accounts could be conscripted, the vital resources industries would, at least temporarily, be nationalized, and the US Dollar will have one-time drastic devaluation.
Sounds like fantasy? Well, the NDAA 2012/2013 gave the President of US such authorities. If he does not plan to use these authorities, why those new legislation?
There will be dump after the pump. Why, because the market traders will start to worry about higher federal funds rate. Only this time, it is real: the total debt load is approaching $17 trillions. Higher interest rate means higher interest expenses, or deeper budget deficit.
Both OMG and CBO forecast average real GDP growth at 5.5% over the next four years, so that the GDP could reach $19.3 trillion by 2017 in order to keep the ballooning sovereign debt in check. However, they only forecast a 150% increase in the interest expenses.
Last time when US economy running at 5.5%, the fed funds rate is above 5%. That would mean at least 300% jump in interest expense from the current low level. That is obviously lying.
Now you understand why CBO or OMG directors can land good jobs in major banks after their retirement.