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A Simulation Of The U.S. Economy To Determine The Effect Of Mandatory Expenses And Interest On The U.S. Debt

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  • Gerard D. Valle

Abstract

Cost for the three major mandatory social programs; Social Security, Medicare and Medicaid have increased at a rate much higher than the Gross Domestic Product (GDP), and thus revenue. As a result, these programs account for a larger portion of the U.S. budget. As projections continue to rise relative to available revenue, a lower level of funds will be available for other programs or the U.S. debt will continue to increase further exacerbating the problem. As the total U.S. debt approaches the yearly GDP (in 2010 the total U.S. debt is projected to be 97% of the GDP), the risk of rising interest rates becomes a larger concern. This paper shows that even a small increase in the interest rate has a big impact on the overall budget. This paper shows that the practice of continuing to increase the U.S. debt at a rate higher than the GDP/revenue increases is simply unsustainable.

Suggested Citation

  • Gerard D. Valle, 2011. "A Simulation Of The U.S. Economy To Determine The Effect Of Mandatory Expenses And Interest On The U.S. Debt," Accounting & Taxation, The Institute for Business and Finance Research, vol. 3(1), pages 33-43.
    • Handle: RePEc:ibf:acttax:v:3:y:2011:i:1:p:33-43
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    More about this item

    Keywords

    Projections; Interest on U.S. Debt; Social Security; Medicare; Medicaid;
    All these keywords.

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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