ECONOMIC ALERT: CBO Director Warns of ‘Fiscal Crisis’…

On the same day House Speaker John Boehner said he would bring a “clean” debt ceiling bill to the House floor — and join Democrats in voting for a 13-month extension of the debt limit — the head of the Congressional Budget Office declared that the “large and growing federal debt” could eventually increase the risk of a “fiscal crisis.” “The large budget deficits recorded in recent years have substantially increased federal debt, and the amount of debt relative to the size of the economy is now very high by historical standards,” Elmendorf told the Senate Budget Committee. “CBO estimates that federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024 (the end of the current 10-year projection period). Such large and growing federal debt could have serious negative consequences, including restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges, and eventually increasing the risk of a fiscal crisis (in which investors would demand high interest rates to buy the government’s debt). More

 

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