NYT: Paul Volcker and Peter Peterson - Ignoring the Debt Problem

In this NY Times article, Paul Volcker and Peter Peterson explain why raising interest rates from here on out will be very difficult to do. It's the impact on the national debt as many have pointed out for some time. Below are a few excerpts.

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"Together, the two of us have 179 years of life experience and 13 grandchildren. We have served presidents of both parties. We have seen more campaign seasons than we care to count — but none as strange as this one.

Insults, invective and pandering have been poor substitutes for serious debate about the direction in which this country is going — or should be going. And a sound and sustainable fiscal structure is a key ingredient of any viable economic policy.

Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II.

Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country. The widely respected Congressional Budget Office has estimated that by midcentury our debt will rise to 140 percent of G.D.P., far above that in any previous era, even in times of war."

. . . .

"Our current debt may be manageable at a time of unprecedentedly low interest rates. But if we let our debt grow, and interest rates normalize, the interest burden alone would choke our budget and squeeze out other essential spending. There would be no room for the infrastructure programs and the defense rebuilding that today have wide support.

It’s not just federal spending that would be squeezed. The projected rise in federal deficits would compete for funds in our capital markets and far outrun the private sector’s capacity to save, to finance industry and home purchases, and to invest abroad."

Click here to read the full NY Times Article