CBO: Debt of the United States much more quickly to economic growth

What is the amount of the indebtedness of the United States have to get before it threatens to crowd out private investment and undermine the strength of the economy?
 
The question of a long discussion with experts on the budget and economists now an official response to the Congressional Budget Office: Start the red ink of the nation, about the limits of economic growth next year to impose.
 
Agency in 2011 showed the long-term prospects of the budget that started the national debt would affect the economy as soon as it reached approximately 77% of GDP. The January CBO budget and economic outlook are expected to reach that level in 2013 due to their high debt scenario is based largely on current policy.
 
“CBO expects that the large public sector deficits in the recession after raising the cost of capital investment restriction in the future …,” Wrote the leading scorer in their non-partisan budget and economic outlook in January.
 
First, the impact would be minimal, but increase over time, rising debt.
 
“Rising debt could reduce national saving, leading to higher interest rates, more foreign loans and investments less nationally, which in turn reduce revenue growth,” said the CBO.
 
Currently there is no evidence that public debt is crowding out private investment. Treasury prices are near historically low level, as well as business income. But the analysis suggests that the CBO, the progress of recovery, some of the overcrowding are a safe bet.
 
The digital agency calculations to model the dynamic effects of rising debt, his view of the long-term budget, a starting point for the traditional static analysis.
 
“Underestimate the predictions in most of the relative severity of long-term fiscal problem, because he does not have negative consequences that would have the accumulation of additional debt on the economy, just as there is no regard for the impact of higher tax rates on incentives for people to work and save, “wrote the director Douglas Elmendorf to CBO.
 
You lose the potential
 
The analysis shows that the gross national product would be 2% to 6% less in 2025, the high indebtedness of the CBO scenario. This reflects both a decline in GDP increases and the dependence on foreign capital.
 
Debt and, once raised can feed. Dynamic analysis shows that the debt ratio would be 6 to 13 percentage points above the rate of 119% in the static analysis.
 
The slower labor force growth as the aging population is a concern. In recent decades, real GDP growth and real interest rates were on the average more or less the same. However, the CBO projects a future in the real interest rate (2.7%) than real GDP growth (2.2%), thus making the debt service for higher and difficult to reverse.
 
One last word of the CBO on the impact of debt in a discussion rather than as the effects of the recession – and, implicitly, the average recovery – was sustained economic growth, or potential GDP.
 
CBO now sees the potential of real GDP by about 3% lower in the coming years as part of the 2010 cases. This is only partly due to debt and additional investments scale back. The CBO has also hampered his view of the potential size of the workforce due to retirements and the erosion of skills in the field of long-term unemployment.