"An article in the The Wall Street Journal recently revealed that our budget situation is likely worse than what the Congressional Budget Office (CBO) projects, meaning we could be in much more debt than we realize.
In 2010, the federal government collected about $2.16 trillion in total tax revenue yet still generated a deficit of nearly $1.3 trillion. This means Washington borrowed about 40 cents of every dollar it spent (and will borrow 43 cents of every dollar this year).
CBO produces two scenarios to project America’s budget outlook: an “original baseline projection” and an “alternative fiscal scenario.” Both are based on differing assumptions, but the alternative fiscal scenario corrects unrealistic assumptions that CBO is instructed to include in its extended baseline.
According to this alternative fiscal scenario, deficits are projected to remain over $1 trillion through 2021. Meanwhile, U.S. debt is scheduled to hit 100 percent of GDP by that time. This is economically unstable, especially since deficits and debt will continue to soar thereafter. Interest rates would likely rise, which means much higher interest payments and higher taxes on all of us in order to fund those payments.
But that’s not all. According to former Federal Reserve governor Lawrence B. Lindsey, our fiscal situation could get even worse. The cost of borrowing is currently low—2.5 percent. However, the average borrowing cost for the past two decades has been 5.7 percent. That means that if borrowing costs rise back to their average levels again, that will add another $4.9 trillion to our interest payments on the debt over the next 10 years. That would all be in addition to the debt mentioned above that we’re already projected to accumulate".............READ MORE
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