One of the nation's foremost economic minds is sending an alarm signal regarding the U.S. budget deficit and national debt.Former U.S. Federal Reserve Chairman Alan Greenspan said he's not "overly concerned" about the recent weakness in the U.S. dollar, Bloomberg News reported Thursday. However, Greenspan is concerned about the long-term costs to the United States associated with its rising national debt.
"There are equations in which certain relationships become progressively explosive," such as if a spiral starts in which increasing interest payments increase the deficit and debt, leading to another increase in interest payments, and so on, Bloomberg News reported.
Fiscal Analysis: Policy makers in Washington should heed Greenspan's words. Even with recent weakness, the dollar has basically returned to its level before the financial crisis; moreover, the dollar's value is partially a function of the large U.S. budget deficit and national debt. On the latter, presently, interest rates are relatively low, with the United States still benefiting from a flight-to-safety into U.S. Treasuries, which has lowered long-term interest rates below what they would have been in normal times (the rate the U.S. government pays on its bonds is certainly lower than the rate lenders would charge other nations, if they had a similar per capita national debt).
However, the period of relatively low interest rates will not last forever. As the global recovery accelerates, institutional investors will rotate out of safe Treasuries and into higher risk/higher return investments, and long-term interest rates will likely rise -- increasing the U.S.'s borrowing costs. The specter of rising rates is one major reason why, after a deficit-cutting health care reform package is passed, Congress must turn its attention to cutting the budget deficit -- including further spending cuts and a tax increase. If Congress acts courageously, the budget can be balanced by fiscal year 2016, assuming a normal GDP growth rate in the U.S.
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Reader Comments (Page 1 of 1)
10-15-2009 @ 5:58PM
martialoffrance said...
here's an idea kill NAFTA offer tax incentives to companies who manufacture and keep jobs here in the US and while were at it bring back some tariffs!
10-15-2009 @ 6:58PM
FOXYLYNX said...
WHY WOULD ANYONE LISTEN TO THIS OLD FROG - HE WAS PART OF THE PROBLEM, HE EVEN ADMITTED HE WAS WRONG. THE DOLLAR, HIGH UNEMPLOYMENT AND THE DEFICIT ARE ALL BAD FOR THE AVG AMERICAN. BUT, NOT TO WORRY, THE BANKS ARE MAKING LOTS OF MONEY ON OUR BACKS. LIKE I ALWAYS SAID, WE HAVE THE BEST GOVERNMENT MONEY CAN BUY.
10-15-2009 @ 8:44PM
william lindblad said...
Alan is a wise old man, but he should just fade away.
He missed the boat on the current mess and he was one of the very few that could have put on the brakes.
10-15-2009 @ 8:55PM
ttalk52 said...
WHENEVER I SEE THIS SNAKE IN CONGRESSIONAL COMMITTEE MEETINGS, NEWS, ETC., I ACTUALLY SEE HIS TONGE FLICKER LIKE A REPTILE...HE CLAIMS, "THE DOLLAR ISN'T FAILING" , WELL, IT'S A SHAME WE DON'T GET TO SEE HIS PORTFOLIO...NOTHING IN BONDS AND LITTLE IN "LIQUID" SAVINGS????????????? SOMEONE NEEDS TO TAKE THIS MANS "EASY BUTTON" AWAY ....NOT EVEN CHINA CAN CONVINCE HIM TO STOP THE PRINTERS.
JESUS, SAVE US OR PLEASE HURRY AND TAKE US. AMEN
10-16-2009 @ 12:12AM
sgentilejr said...
There is no hope for our nation and it's economy. There will be NO RECOVERY. Not now, not next year and not ever.
YOU are the problem and YOU don't know it and/or YOU won't admit it. YOU buy all the Imported products and YOU put your fellow Americans out of their jobs. There will NEVER be more jobs or better jobs in the USA when you spend all your money on Imported products. Thus YOU caused this mess and YOU will cause this mess to grow worse and worse and worse until no jobs remain because of your ongoing non-stop imported product purchases. YOU have very effectively destroyed the USA by spending your incomes of Imported products. Don't worry about the Communists taking over or bin Laden destroying the USA for YOU already have destroyed the USA permanently and far more effectively.
10-16-2009 @ 6:59AM
STEVE KOREN said...
Why is anybody paying any attention what that mumbling idiot "THE MAESTRO: aka Greenspan has to say? The guy that orchestrated demise of US as an economic superpower with his cohorts on the Wall St ,Waserstin, Klug, Lewis ,Poulson,Geitner ,Abrams ,Madoff and the family.
They transfered industrial power and the know how to
COMMUNIST CHINA ,and they call OBAMA A SOCIALIST
because he wAnts sliver of the pie for all the AMERICANS.
11-15-2009 @ 9:11PM
Thomas Carroll said...
People can rant and rave, back and forth, but the fact remains the Stupak or Stupid amendment is Unconstitutional, Period. It would be immediately challenged and defeated. These corporations are laughing at us arguing over pennies while they pilfer trillions. Because of an accident I have been involved intimately with our health care industry since 1985, of which none of those services I received exist today, because insurance companies quit paying for many, many necessary rehab and basic services that have decimated the quality of care on one end. Simultaneously they have jacked premiums and bleed families bankrupt on the other end. Besides destroying a very capable health care industry and bankrupting millions, insurance companies have corrupted the political process. For a real Eye Opener go here: SHARE THE CHART, EVERYWHERE!
http://www.lafn.orggvdcNatl_Debt_Chart.html#DownloadChart.
SEEING IS BELIEVING