TaxVox Blog Discusses US Debt Financing Over Long Term

7 November 2008 - 11:59am
November 7 - Howard Gleckman of TaxVox, today, questioned how much longer the U.S. Treasury will be able to continue selling immense numbers of bonds. Gleckman noted that the Treasury has raised more than $1 trillion in bonds-or new debt-over the last six months, but had grim predictions for the US's ability to continue financing its debt:

 

"Today, sinking worldwide financial markets are keeping Treasuries afloat...This won't last for long. Neither will the good revenue fortune of the past two decades...With U.S. consumers dialing back in the face of a slumping economy, exports to the U.S. also will plummet, dramatically reducing foreign demand for Treasuries. In the long run, the story will be even worse. I won't recount the now-familiar tale of how runaway health care costs will push federal spending far beyond the limits of the current tax code...Bob Rubin used to warn that while there was no way to know when markets would fall out of love with U.S. debt, they inevitably would. And when they did, the plunge would be fast and ugly. That is what has happened to most every other borrower on the planet over the past year, and it is naïve to think U.S. Treasuries will somehow be immune. It is this risk, and not the vicissitudes of today's slumping economy, that may prove to be Barack Obama's biggest challenge."