'I think that CBO report is concerning.'
During an interview aired on Friday’s edition of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers stated that he believes the debt-to-GDP ratio “could easily” increase by 30% over the next decade to 130%, which would increase interest rates and the deficit, and barring “very low” interest rates, “we are going to have fiscal problems and fiscal...
Summers stated, “I think that CBO report is concerning…my guess is that the ultimate debt trajectory may well run higher than the CBO is saying. It assumes that fed funds is going to settle for the long-term at 2.5 without there being a recession. That strikes me as having much more room to be too low than to be too high. The CBO does its job, which is to predict current policy.
He added that it’s not “an imminent emergency” or “something that will be any kind of crisis if it is not dealt with this year.” And “those who somehow use fiscal concern as an excuse to not raise the debt limit are exacerbating all of the fiscal risks.” Summers concluded, “I do think we’ve got to recognize that unless interest rates really revert to very low levels — which is certainly possible. It is what happened in the era of secular stagnation — that I think we are going to have fiscal problems and fiscal challenges that we are going to have to address.”
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