Deficit Future

From Boston.com

“For the next decade or two, on some reasonable sets of assumptions, our borrowing cushion shrinks significantly, threatening to test our capacity to raise funds to finance unprecedented deficits,’’ Greenspan said in testimony to the Senate Homeland Security and Government Affairs Committee.

Greenspan warned that the rising public debt leaves the government’s fiscal position vulnerable to a rise in interest rates.

In answer to a question about why rising debt is a concern, Greenspan said: “The critical issue that economists worry about’’ is the spiral that occurs with ever-rising debt and debt service, often followed by higher interest rate. As a consequence of that, “the debt service becomes explosive and that moves directly into the budget deficit,’’ he added.