Even the Fed Thinks Current Debt Levels Are Unsustainable

In the initial message, Secretary Janet L. Yellen writes: "This Financial Report discusses not only current financial results but also important, long-term trends affecting our critical social insurance programs and fiscal health." The report not only discloses the current debt level, but also projects the cost of the government's future obligations to its citizens.

It is important to clarify that the above graph only considers "Debt held by the public," currently around 100 percent of GDP; however, if debt held by Federal Reserve Banks were included, the total debt would be 130 percent of GDP. The Fed argues that this additional $6 trillion debt should not be considered because "Federal Reserve Banks remit their profits to the Treasury, [and] any interest earned on their federal debt is rebated to the federal government." But if the Fed continues to increase its position relative to US debt, this consideration might need to be reviewed.

In any case, the Department of the Treasury projects the future debt of the government and calculates that it could triple GDP within forty years.

Let's see why the debt is projected to become more than six times GDP. First, considering a seventy-five-year projection period, the net present value of future tax revenues is estimated to be $295.4 trillion.

With these adjustments, the present value of future costs less the present value of future income rises to $154 trillion, and let's recall that this figure does not include interest expenses nor the debt held by the Fed in their books.

Some years ago Citigroup calculated what the debt would be if future government pension liabilities were accounted for in present value terms.

Subject to the important caveat that policy changes are not so abrupt that they slow economic growth, the sooner policies are put in place to avert these trends, the smaller are the adjustments necessary to return the nation to a sustainable fiscal path, and the lower the burden of the debt will be to future generations.
 

https://noqreport.com/2021/08/31/even-the-fed-thinks-current-debt-levels-are-unsustainable/