As the government projects its debt to reach $19.6tn by 2015, it also asserts the debt will not surpass GDP…. lolwut?!
The national debt of the U.S. is expected to pass $13.6tn this year and “climb to an estimated $19.6 trillion by 2015” Reuters reported the U.S. Treasury Department stated in a report sent to Congress. “Tyler Durden”, the pseudonymous editor of Zero Hedge, refutes the assertions that the debt will not eclipse the Gross Domestic Product (GDP):
Even as Geithner anticipates U.S. total debt to hit $19.6 trillion by the end of 2015, somehow, in some parallel universe, he also anticipates U.S. GDP will rise at a 5% [Compund Annual Growth Rate] for the next five years! Total U.S. GDP, which was at $14.2 trillion for 2009, is expected to ramp up by 2.7% in 2010, and then really put on the afterburners in 2011 through 2015, averaging almost 6% each year, and hitting a stunning $19.2 trillion in 2015.
The ridiculousness of this assumption is beyond comprehension. And even so, total debt/GDP will still be over 100% per the government’s baseline assumptions.
Alternatively, if one assumes, as [Pacific Investment Management Company] does, a GDP growth rate of 1.5% for the next 4-5 years courtesy of the 10% unemployment “new normal”, total debt-GDP will hit 126% in 5 years. And this obviously excludes [government-sponsored enterprise], [social safety nets] and Medicare off balance sheet debt. Lastly, the Treasury assumes that even with 100% Debt to GDP, the funding cost on U.S. market debt in 2015 will be only 4.7%, compared to the 1990-2009 average of 5.9%.
His full analysis with charts the full Treasury report is here.