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November 09, 2005

Alan Greenspan Warns to Congress

The report is:

Greenspan Warns Congress on Threat From Deficit: [Greenspan] issued some of his sternest warnings to Congress about the budget deficit, particularly as it relates to Social Security and rising health care costs. It is a subject he has highlighted in the past, but not as bluntly. "So long as health care costs continue to grow faster than the economy as a whole, as seems likely, federal spending on health and retirement programs would rise at a rate that risks placing the budget on an unsustainable trajectory," he said. "Specifically, large deficits will result in rising interest rates and an ever-growing ratio of debt service to G.D.P. Unless the situation is reversed, at some point these budget trends will cause serious economic disruptions."...

Translation: Health care costs are going to rise as a share of GDP. That means federal spending is going to rise as a share of GDP. Failing to bring the budget into effective balance over the long run will cause economic chaos. The conclusion is left as an exercise to the Congress: if you need to balance the budget and if spending is going to increase that means ______.

Posted by DeLong at November 9, 2005 02:23 PM