Nobel Prize winning economist Paul Krugman said that interest payments on existing debt are not going to be a major headache going forward. Well, even Nobel Prize winners can be wrong. Consider the Congressional Budget Office, which has a very cautious estimate of what’s going to happen in the future has the interest payments on the debt rising from 663 billion now to 1,440,000,000,000. In 2032, that’s an increase of 117 percents. Meanwhile, GDP over that period is only going to grow about 50%. So interest payments on the debt are gonna go twice as fast as the economy. And it doesn’t take any mathematical sophistication to know that going something twice as fast as the economy is not a way that’s sustainable. Now, CBO has a very low interest rate assumption. If we were to take just current interest rates, in other words, that they won’t fall arise, interest instead will rise to 2,290,000,000,000, or 59%, higher than what CBO says, and three and a half times what it is today. That will take it up to 5.7% of GDP. And by 2043 10 years later, the interest on the debt is going to consume 8% of GDP, which is three and a half times as much as now, another five and a half percent of GDP is on the order of half of all that personal income taxes we collect, that’s going to be a major problem going forward. Now, it can get worse, because the current curve is what’s called inverted, the long term rates are lower than the short term rates. And that’s an unusual situation. So if the curve were to D invert, the cost of interest would go even higher. For example, by 2033, we would have a $2.8 trillion interest payment, or 7.8% of GDP, and by 2043, it would be 10.4% of GDP. These are numbers that take us into lala land when it comes to being able to actually service the debt. Now, what Krugman probably forgot in it, in his analysis was that all the existing debt is going to roll over. And it’s going to roll over into much, much higher rates. Just look at when the current debt was issued. In the last 15 years, when most of it was issued, the 10 year bond, for example, spent only 14 months, over 2% and 34 months in those 15 years, over 1%. Now, it’s about 5% yield, it gets worse with regard to the 10 year yield. So when all of this debt rolls over, we’re going to see higher and higher interest expenses. Because like any homeowner who sells his home and buys a new one, it’s going to be taking out a mortgage at a much higher rate. And that’s what’s going to kill the US budget by driving up interest costs. Now, where I agree with Krugman is this is not going to lead to a default by the US government. Now, the government generally will not do such a thing. Instead, it will simply print the money to cover the extra debt. This is called quantitative easing. It’s something that we did for quite a bit during the last period. Now long term, is that inflationary? Absolutely. But it’s not a default. Instead of defaulting on the debt, the government is simply going to inflate it away. This is Larry Lindsey for straight arrow News.