CALL IT THE MIRACLE OF COMPOUND INTEREST IN REVERSE
I’m not sure I follow Bruce Bartlett’s logic when he says that the G.A.O’s forecast of Medicare spending rising to 5.9% of GDP in 2040, compared to 3.0% now, is evidence federal entitlements are only “rising gently.” Actually, it’s evidence of the opposite. But another point Bartlett makes can’t be denied: if current financing trends continue, interest on the national debt will eventually explode. Net interest accounts for just 1.4% of GDP now, in part, one presumes, because interest rates are artificially low (thanks, Ben!). But even under benign assumptions (3.4% on the 10-Year in the near-term; 5% longer-term), net interest will account 10.9% of GDP by 2040 and (cover your eyes!) 41% by 2080. That won’t really happen, of course. If current budgetary trends continue as they are, the economy will have collapsed long before 2080 actually arrives:
One is reminded of Herbert Stein. . . .