You're watching...
Deloitte Director of Federal Government Affairs Tom Davis on the government’s debt and the need to rein in spending or increase revenue.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Nearly every day we talk -- the shell about the staggering debtor nation has accumulated fifteen point seven trillion dollars us a number we use and it's a lot of money right.
But what is our actual debt was three times that amount well a new report from Deloitte says that's exactly the case here to explain.
One of the advisors and reviewers of the report Tom Davis he's director of federal government affairs for Deloitte.
And a former congressman from Virginia and that's a heck of a long titled the thanks for joining us Tom appreciate if it's.
So how how do you get to a number that is fifty trillion because that's -- -- you're saying -- data's.
Well -- that didn't get that number that is used for debt service today's just the amount held by the public.
They don't talk about the unfunded obligations through Social Security.
But through health care through pensions that the government has to pay.
About that because we don't issue bonds to pay for that is just a future obligation we don't count that in the balance.
I think that's amazing and of course most people don't think about that.
Using their other risks though is well you say that our -- is also subject to the fluctuations of the economy.
Well absolutely and if you look at the economic assumptions -- on which right now the budget -- we think there.
Probably a little unrealistic and probably understated.
We also.
-- take it was a brother items.
Yeah interest rates I think are probably lower.
Then we assume they're going to be over the time and we -- all this together it swells the budget -- -- is significantly.
And the -- -- attacked with a better.
How could the federal debt raise the cost of borrowing -- companies for individuals.
Well right now that of the current accounts and budget only -- 6% goes to pay interest payments.
-- -- I came to congress originally it was higher than that.
But interest rates are so artificially low right now it's kind of mask but most of our debt has our report points out is short term.
So that these interest rates could rise very very quickly if China or some of the bond holders to -- at a premium for a for US dollars that can happen any time.
What do you mean by that I don't understand explain.
Well what happens as we try to sell bonds at a certain interest rate if all of a sudden.
The people who are buying the bonds they were were not get a buy -- bonds unless we get a higher return on it.
At that point that would drive up interest rates in since the -- of our.
Interest is short term.
They can drive up interest rates pretty quickly.
Well China -- number one buyer -- foreign -- that is our treasury debt what's the solution here in your view.
-- that the solution is look we are right now spending 25% GDP annually but we're only our income is 15% of GDP.
So basically we're borrowing forty cents for every dollar that the government's business -- -- Just over the last several years that's gotta be -- we're gonna have to take a look at new revenue similar somewhere or cutting spending short term is certainly over the long term.
That means going into some of the entitlement programs right now which -- the fastest growing parts of the US budget.
Who's gonna mean new revenues from somewhere and how you balance that as I guess part of the political debate.
About the body politic -- to date has been unwilling to go in either direction.
A sewage is swells and gets worse -- -- gets worse and higher and more every -- Tom thanks for coming on tonight you know thanks.
