The Congressional Budget Office (CBO) released figures this week on the government’s deficits and the national debt that are downright scary. Unfortunately, they’re not nearly scary enough. The assumptions the CBO incorporates are optimistic and will almost certainly be undercut by reality.
The headline projection was the national debt will almost double in 30 years. Using the rule of 72, T=72/r, where T is the time in years required for principle to double and r is the annual interest rate compounded, a 30-year doubling time implies the debt is growing at 2.4 percent annually (30=72/2.4). However, the national debt almost doubled during George W. Bush’s two terms, and almost doubled again during Barack Obama’s two terms. That implies a T of a little more than 8 years. To be conservative (because debt almost doubled but not quite), round the T up to 9 years. Plug that into the rule of 72, and you have the debt growing at 8 percent per year (9=72/8), or over 3.3 times the rate the CBO is assuming. Scary as that 30-year doubling sounds, simply extrapolating the reality of the last 16 years projects another doubling in not 30, but 9 years, or a year longer than Donald Trump’s potential two terms.