State of Innovation

Patents and Innovation Economics

Federal Budget Deficit: Omnibus Spending Bill Killed

The federal budget deficit is $14 trillion not including unfunded liabilities.  Presently, the US is planning on having budget deficits of around $1 trillion for at least the next ten years.  This means that by 2020 the US will have debt of about $24 trillion.  If the economy starts to grow or inflation picks up or US bonds are downgraded, the interest on this debt will be significantly higher than we are paying today.  The most optimistic scenario for the interest rate in 2020 is around 5%.  That would mean the US will be paying $1.2 trillion in interest.  Since I do not believe the US economy will grow very fast this decade, no more than 2% per year – see Long Term Economic Predictions, I do not believe the federal budget will grow very much.  As a result, the $1.2 trillion in interest will by about one third of the federal budget.  If inflation picks up or investors lose confidence in the US government’s ability to pay its debt, the interest could be easily 10% and payments could be as much as $2.4 trillion, which would be 66% of the federal budget.  This is unsustainable.

December 17, 2010 - Posted by | -Economics | , ,

1 Comment »

  1. Perhaps if they stop putting additional language into proposed legislation for bills the public does not want to see passed, things would go a little more smoothly. One issue or only related issues per bill, sure makes sense to me. Some bills just need a little more focused attention. Other bills are foolish and should be discarded immediately without taking up valuable evaluation time.

    Comment by Laura | December 19, 2010 | Reply

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