Sunday, July 3, 2011
The Congressional debt bind
Congress owes 15 trillion. The maturity period for roll over is about five years. If Congress found an investment that justified more debt, say an investment that doubles GDP growth. Then debt service costs on past debt will double , costing another $300 billion a year or so. At a 30% tax rate, that means Congress has to do something that increases GDP by a trillion, or 6%. There is no mathematical solution that allows Congress to make any realistic investment, except an investment in restructuring itself, default. Congress simply has too many bad debts from bad past investments.
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