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Letter to the Honorable Paul Ryan [i] (June 2009)

handle is hein.congrec/cbo8114 and id is 1 raw text is: O CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 June 30, 2009 Honorable Paul Ryan Ranking Member Committee on the Budget U.S. House of Representatives Washington, DC 20515 Dear Congressman: As you requested, the Congressional Budget Office (CBO) has analyzed the impact of the three interest rate scenarios that you specified on deficits and debt held by the public. We have compiled such deficit and debt estimates relative to projections presented in the Analysis of the President's Budgetary Proposals for Fiscal Year 2010 (published in May 2009). The three interest rate paths assumed, which are shown in Table 1, are: 1. The rate on 10-year Treasury notes would average 3.75 percent for calendar year 2009 and all interest rates would rise after 2009 such that the rate on 10- year notes would approximate its average level over the 1991-2000 period (6.6 percent). 2. The rate on 10-year Treasury notes would average 3.75 percent for calendar year 2009 and all interest rates would rise after 2009 such that the rate on 10- year notes would approximate its average level over the 1981-1990 period (10.5 percent). 3. Interest rates would follow a path that is consistent with the average of the top 10 projections of the most recent Blue Chip economic forecast. That average for the latter part of the period is 6.4 percent for 1 0-year notes. CBO calculated 3-month interest rates consistent with the assumptions specified for 10-year rates. For scenarios 1 and 2, CBO used the average 3- month and 10-year interest rates during the 1990s and 1980s, respectively, to determine the steady-state levels for the latter part of the projection period. CBO assumed that rates would steadily rise-by no more than 2 percentage points a year-until they reached the specified average levels

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