Congressional Budget Office Warns Obama
The mushrooming U.S. government debt burden may cause a new financial crisis by spurring a sharp rise in interest rates, warns Doug Elmendorf, director of the Congressional Budget Office (CBO).(Read more here.)
Countries such as Greece already have seen such crises, as their debt buildups sent interest rates soaring and drove away international bond investors.
The CBO projects that U.S. federal government debt will reach 62 percent of GDP by Sept. 30, up from 36 percent just three years earlier. Only once before has that figure surpassed 50 percent, during and just after World War II.
The debt, of course, is created by massive budget deficits, with the White House projecting a gap of $1.47 trillion this year.
Elmendorf sees two possible outcomes for our current predicament – one mild, one harsh.