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The exact magnitude of the effect is of course debated but is estimated at between 0.18-0.19% lower growth for every 10% GDP debt above about 84% of GDP and 0.16% lower for every 10% above 60% of GDP (see graph below).

This seems to indicate that the effect of high debt is a nonlinear decrease in economic growth; however, we will represent the relationship as a tri-linear curve.

For the sake of simplicity, say that means the interest rate reaches ~5% on treasuries.

This is in excess of 100% increase over the current cost of servicing debt for the US.

Let us review our assumptions: • (real) Growth rate starts at 2% but is decreased with increasing debt • Expenditures and Revenue as a portion of GDP is constant (~3% funding gap) • Inflation reaches 3% • The interest rates on debt reaches 5% Now, take a theoretical person “John” he will retire in 2045 and die in 2063.

When John retires in 2045, our scenario would predict a real growth rate of 1%, however, because this includes a 1%/annum growth rate in population, average living standards would cease to increase at this time.

On top of all this bad news in terms of debt, growth and interest rates we will have acceleration in the costs of the major entitlement programs as the populace continues to age and even grow infirm before their years (some of this can be attributed to the increase in the average American’s waistline).

Again, there is no political will to reform these programs.

Short term pain will be high if spending is to be controlled, and that only gets worse as the deficits grow.First, we must cover the current liabilities, debts, and revenue streams of the Federal government.All figures presented will be based on the most recent year available- 2016 data unless otherwise noted.In 2063 when John dies, the debt to GDP ratio would be equal to 2.7 and real growth would be -1%.Japan aside, it is not clear anyone would be willing to continue to lend to a country with such anemic growth and high-debt.

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