US budget office highlights tipping point for US debt

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The US CBO released a report outlining long-term US debt scenarios.

The first projection assumes that the US hits the ‘fiscal cliff’, automatic budget cuts take place and the Bush tax cuts expire (they note that this would hurt growth). The second assumes that tax cuts are extended and social programs/obligations continue to grow at the current pace.

Policymakers will need to increase revenues substantially above historical levels as a percentage of GDP, decrease spending significantly from projected levels, or adopt some combination of those two approaches.

The timeline gives the US until about 2022 to really tackle the big questions. After that, interest payments begin to spiral.

My prediction:

Author: Adam Button

Adam Button is the managing editor of ForexLiveâ„¢. He was previously the chief currency strategist at XForex and has also worked with Intermarket Strategy. Adam believes there's an edge in knowing every tidbit of news. He was formerly the head of the markets team at the Canadian Economic Press and is a graduate of Ryerson University. Adam lives in Montreal, follow him on Twitter: @FX_Button.



budget|budget office|CBO|debt|deficit|US debt

Adam Button

One Comment

  1. Though I am not an economist it seems to me that the 2022 tipping point date is estimated based on a big guess about what future interest rates will be.
    When the dollar comes into question by foreign countries the Fed will loose control of interest rates and we could reach the tipping point much earlier than 2022 due to a decline in economic confidence in the USA. Note: Tipping point -> “US dollar’s death spiral”

    No we can’t kick the can any farther down the road, we need a solution now!


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