I tried to download "Federal Debt and the Risk of a Fiscal Crisis" a CBO report released 07/27/10, but alas I could not

"Federal Debt and the Risk of a Fiscal Crisis" This is a very telling document. Now that the CBO website is not being flooded; I can get my hands on the document. Here are some quotes...

- Some Consequences of Growing Debt

The economic effects of budget deficits and accumulating government debt can differ in the short run and the long run, depending importantly on the prevailing economic conditions when the deficits are incurred. During and shortly after a recession, the higher spending or lower taxes that generate larger deficits generally hasten economic recovery. In particular, when many workers are unemployed, and much capacity (such as equipment and buildings) is unused, higher government spending and lower tax revenues usually increase overall demand for goods and services, which leads firms to boost their output and hire more workers.4 But those short-term benefits carry with them long-term costs: Unless offsetting actions are taken at some point to pay off the additional government debt accumulated while the economy was weak, people’s future incomes will tend to be lower than they otherwise would have been. More generally, persistent, large deficits that are not related to economic slowdowns—like the deficits that CBO projects for coming decades—have a number of significant negative consequences. Therefore, the sooner that policymakers agree on credible long-term changes to government spending and revenues, and the sooner that those changes are carried out without impeding the economic recovery, the smaller will be the damage to the economy from growing federal debt.

- Crowding Out of Investment

One impact of rising debt is that increased government borrowing tends to crowd out private investment in productive capital, because the portion of people’s savings used to buy government securities is not available to fund such investment. The result is a smaller capital stock and lower output and incomes in the long run than would otherwise be the case. The effect of debt on investment can be offset by borrowing from foreign individuals or institutions. But additional inflows of foreign capital also create the obligation for more profits and interest to flow overseas in the future. Thus, although flows of capital into a country can help maintain domestic investment, most of the gains from that additional investment do not accrue to the residents.

Let me sum it up for you.

- The huge deficits we now have; (which are NOT caused by the economic downturn) such as Health Care Reform, result in damage to the economy in the long term.

- The increase in debt has forced the government to borrow from foreign entities. Which in the short term helps, but at a cost. Because the borrowed money is really foreign investment in the U.S.; the American people are not the ones who will reap the benefits of debt repayment.

- Need for Higher Taxes or Less Spending on Government Programs

Another impact of rising debt is that, as government debt grows, so does the amount of interest the government pays to its lenders (all else being equal). If policymakers wished to maintain government benefits and services while the amount of interest paid grew, tax revenues would eventually have to rise as well. To the extent that additional tax revenues were generated by increasing marginal tax rates, those rates would discourage work and saving, further reducing output and incomes. Alternatively, policymakers could choose to offset the rising interest costs, at least in part, by reductions in benefits and services. To be sure, slowing the growth of government debt to hold down future interest payments would require increases in taxes or reductions in government benefits and services anyway. However, earlier action would permit the changes in policy to be smaller and more gradual, and it would give people more time to adjust to the changes—although it would also require more sacrifices by current generations to benefit future ones.

The democrats plan for America is NOT sustainable. Congress is trying to spend beyond the country's ability to make good on the debt. Not only do we not have the money, we can't afford to borrow that much money, because the sheer act of borrowing to that extent renders the our economy virtually unprofitable! Foreign investment will dry up once people realize that the U.S. economy is no longer growing.

In other words the democrats proposed "fixes" to our financial situation will dead-end the country.

We don't have any more options, we have to turn this around. We have to elect leaders who will fix these problems by getting out of the way and letting the markets correct.

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