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  • sky_walker618 sky_walker618 May 30, 2013 9:14 AM Flag

    US will likely run a perpetual federal budget deficit

    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.

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