scenarios for mandatory federal spending on health care shown in figure 2 – 3, p. 39, in cbo, the long - term budget outlook, in note 2. this result requires that the nominal rate of interest paid on government debt equals the rate of growth of nominal gdp, a condition that might plausibly be expected to hold over time. if the interest rate on government debt is higher than the growth rate of nominal gdp, as might happen if creditors become wary of lending, then a primary budget surplus rather than primary balance would be needed to stabilize the ratio of debt to gdp. bis central bankers ’ speeches infrastructure. our nation cannot reasonably expect to grow its way out of our fiscal imbalances, but a more productive economy will ease the tradeoffs that we face. thank you. i would be pleased to take your questions. bis central bankers ’ speeches

/ 2 percent of gdp by the end of the decade. 2 in subsequent years, the budget situation is projected to deteriorate even more rapidly, with federal debt held by the public reaching almost 90 percent of gdp by 2020 and 150 percent by 2030, up from about 60 percent at the end of fiscal year 2010. the long - term fiscal challenges confronting the nation are especially daunting because they are mostly the product of powerful underlying trends, not short - term or temporary factors. the two most important driving forces behind the budget deficit are the aging of the population and rapidly rising health - care costs. indeed, the cbo projects that federal spending for health - care programs will roughly double as a percentage of gdp over the next remarkably similar to those that occurred during the earlier episode of policy easing, notably in the months following our march 2009 announcement of a significant expansion in securities purchases. this alternative fiscal policy scenario, which assumes, among other things, that most of the tax cuts enacted in 2001 and 2003 are made permanent and that discretionary fiscal outlays rise at the same rate as gross domestic product, is presented in congressional budget office ( 2010 ), the long - term budget outlook ( washington : cbo, june ( revised august ) ). bis central bankers ’ speeches 25 years. 3 the ability to control health - care spending, while still providing high - quality care to those who need it, will be critical for bringing the federal budget onto a sustainable path. the cbo ’ s long - term budget projections, by design, do not account for the likely adverse economic effects of such high debt and deficits. but if government debt and deficits were actually to grow at the pace envisioned, the economic and financial effects would be severe. sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long - run effects on u. s. output, incomes, and standards of living. moreover, diminishing investor confidence that deficits will be brought under control would ultimately lead to sharply rising interest rates on government debt and, potentially, to broader financial turmoil. in a vicious circle, high and rising interest rates would cause debt - service payments on the federal debt to grow even faster, resulting in further increases in the debt - to - gdp ratio and making fiscal adjustment all the more difficult. in thinking about achieving fiscal sustainability, it is useful to apply the concept of the primary budget deficit, which is the government budget deficit