Lawerence Lindsey: The Deficit is Worse Than We Think

Lawrence Lindsey wrote an interesting op-ed piece for today’s Wall Street Journal titled The Deficit Is Worse Than We Think.

He points out three reasons for concern:

1. The projected interest rates are based on 2.5% while the average interest rate in the past has been 5.7%.

The 10-year rise in interest expense would be $4.9 trillion higher under “normalized” rates than under the current cost of borrowing. Compare that to the $2 trillion estimate of what the current talks about long-term deficit reduction may produce, and it becomes obvious that the gains from the current deficit-reduction efforts could be wiped out by normalization in the bond market.

2. The growth forecasts are much higher than the academic consensus believes we should expect, which is 2.5%. The president’s budget predicts growth of 4%, 4.5%, and 4.2% (for 2012, 2013, and 2014 respectively). Growing at the trend of 2.5% will add an additional $4 trillion to our debt.

3. The long-run cost estimates of Obamacare will be much higher than expected.

In all fairness, Mr. Lindsey was the director of the National Economic Council for 2001-2002 and had a significant role in passing Bush’s tax cut. He also estimated the cost of the Iraq war to be $200 billion (it’s now supposedly over $700 billion).


Mr. Lindsey played a part in creating this deficit.

2 thoughts on “Lawerence Lindsey: The Deficit is Worse Than We Think”

  1. GDP of 4% is laughable under this administration’s policies. I’m not even sure 2% is likely… which would mean we’re in even more trouble than Lindsey suggests!

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