Pimco’s Bill Gross disses Obamacare: It’ll increase the deficit, not reduce it — “Long term bondholders beware”March 24th, 2010 | 10:24 PM | by L. Winthorpe III |
Pimco Bond Guru Bill Gross’ April 2010 Investment Outlook throws water all over Obama’s recently signed healthcare bill. Contrary to the CBO’s estimate, he says the deficit will balloon, not shrink. “Long term bondholders beware.” He wrote:
The trend promises to get worse, not better. The imminent passage of health care reform represents a continuing litany of entitlement legislation that will add, not subtract, to future deficits and unfunded liabilities. No investment vigilante worth their salt or outrageous annual bonus would dare argue that current legislation is a deficit reducer as asserted by Democrats and in fact the Congressional Budget Office. Common sense alone would suggest that extending health care benefits to 30 million people will cost a lot of money and that it is being “paid for” in the current bill with standard smoke, and all too familiar mirrors that have characterized such entitlement legislation for decades. An article by an ex-CBO director in The New York Times this past Sunday affirms these suspicions. “Fantasy in, fantasy out,” writes Douglas Holtz-Eakin who held the CBO Chair from 2003–2005. Front-end loaded revenues and back-end loaded expenses promote the fiction that a program that will cost $950 billion over the next 10 years actually reduces the deficit by $138 billion. After all the details are analyzed, Mr. Holtz-Eakin’s numbers affirm a vigilante’s suspicion – it will add $562 billion to the deficit over the next decade. Long-term bondholders beware.
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