Zeev's Turnips Talk Politics (ZTTP)

[StephanieVanbryce]

Thanks Jon - I read that article also - You left out a few key points .

"Budget analysts inside and outside the government said the positive turn is likely to be short-lived. Indeed, after a four-year absence, the Treasury Department announced yesterday it is considering reissuing its 30-year Treasury bond to help finance long-term government debt, jolting the bond markets and pushing down the price of existing 30-year securities

And then this

"But forecasted surpluses turned into huge, forecasted deficits. Since President Bush entered office, the total federal debt -- including debt to the public and debt owed the Social Security system -- has risen from $5.7 trillion to $7.8 trillion. Long-term interest rates should begin rising in the near term, so the government should lock in interest rates on 30-year bonds soon, Wyss said, before the cost of federal borrowing begins to rise.

And this

" Few economists say the U.S. government is out of the woods. One of the reasons for the turnaround, the alternative minimum tax, should be reduced or eliminated before it starts impinging on economic growth, Bethune said.

Also, by next year, costs from the new prescription drug benefit should start rolling in. By the end of the decade, pressure from the retiring baby boom generation will start pushing Medicare, Medicaid and Social Security costs up significantly.

Treasury officials have long resisted reissuing 30-year bonds, in part, because "nobody wanted to admit the deficits were permanent," said Wyss, the Standard & Poor's economist.

Treasury officials disputed that notion during a meeting with reporters yesterday.

"The deficit has nothing to do with it," said Timothy S. Bitsberger, assistant Treasury secretary for financial markets. "In fact, we think the deficits are coming down."

Wall Street wasn't buying it. "If you weren't borrowing this much, you wouldn't be doing it," Wyss said. "No question."

And the real kicker

"But forecasted surpluses turned into huge, forecasted deficits. Since President Bush entered office, the total federal debt -- including debt to the public and debt owed the Social Security system -- has risen from $5.7 trillion to $7.8 trillion. Long-term interest rates should begin rising in the near term, so the government should lock in interest rates on 30-year bonds soon, Wyss said, before the cost of federal borrowing begins to rise.

Moreover, aging populations around the world have forced governments -- especially in Europe -- to shore up pension funds by requiring that they invest in long bonds. Washington is considering similar changes for its private pension systems. That has sent demand for long bonds skyrocketing, said Neal M. Soss, chief economist at Credit Suisse First Boston LLC.

Bush's proposal to convert part of Social Security to individual investment accounts would also add considerable demand for 30-year bonds if it were to pass, Soss said. A decision on whether to issue 30-year bonds will be announced Aug. 3, Bitsberger said.

But forecasted surpluses turned into huge, forecasted deficits. Since President Bush entered office, the total federal debt -- including debt to the public and debt owed the Social Security system -- has risen from $5.7 trillion to $7.8 trillion. Long-term interest rates should begin rising in the near term, so the government should lock in interest rates on 30-year bonds soon, Wyss said, before the cost of federal borrowing begins to rise.

Moreover, aging populations around the world have forced governments -- especially in Europe -- to shore up pension funds by requiring that they invest in long bonds. Washington is considering similar changes for its private pension systems. That has sent demand for long bonds skyrocketing, said Neal M. Soss, chief economist at Credit Suisse First Boston LLC.

Bush's proposal to convert part of Social Security to individual investment accounts would also add considerable demand for 30-year bonds if it were to pass, Soss said. A decision on whether to issue 30-year bonds will be announced Aug. 3, Bitsberger said.

I am guessing this is one of those articles that we have all become familiar with that says something like , "well, right this minute it's good" , but, starting in one hour this little fact will change that " Thanks Jon - I appreciate your taking the time , I really do.