Friday, January 29, 2010

GDP Grows Robust 5.7% in Q4

But could it grow without the government borrowing 25% of GDP? And how will we pay the bill?

Further, the large increase in debt will result in significantly high interest payments on what is owed, the CBO projections show. 

“With such a large increase in debt, plus an expected increase in interest rates as the economic recovery strengthens, interest payments on the debt are poised to skyrocket,” said the CBO.

“The government’s annual spending on net interest will more than triple between 2010 and 2020 in nominal terms, from $207 billion to $723 billion, and will more than double as a share of GDP, from 1.4 percent to 3.2 percent,” reads the report. 

The CBO also noted that the deficit in 2009 “was the largest as a share of GDP since the end of World War II, and the deficit expected for 2010 would be the second largest.”