100-year U.S. Treasury bonds?

Here’s an interesting idea: 100-year U.S. Treasury bonds, from Todd Buchholz and Jim Carter:

The Congressional Budget Office calculates that normal, higher rates would increase the deficit by about $4 trillion over 10 years. This risk could be better managed by the Treasury locking-in today’s low rates by issuing 50-year or 100-year bonds.

The authors make a compelling case by citing the many instances of 100-year bonds issued to strong demand: Disney, Coca-Cola, IBM, Federal Express, Ford, Ohio State, Yale University, Mexico, and maybe soon Canada.

Why not issue longer-term debt that locks in lower rates? Well, the rate spread means that “lower” is relative over time. Longer-term rates are higher now, even though they would be almost certainly lower than future rates.

Political self-interest might argue for short-term debt because short-term debt yields are typically the lowest, which makes the deficit picture look temporarily better. But short-term borrowing also virtually guarantees that future generations of Americans will face higher debt burdens and higher taxes.

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