But Pimco’s Bond King and Barron’ s Roundtable member Bill Gross contends the relatively high yield on a 30-year bond (compared to a less than 1% on a two-year note) reflects the mounting unfunded obligations taken on by the U.S. government.<\/p>\n
In his latest monthly missive, Gross notes the discounted present value of future social-insurance expenditures, mainly Social Security and Medicare, total $46 trillion. The passage of health-care reform will only add to that entitlement.<\/p>\n
“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,” Gross writes. “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 mirros that have characterized such entitlement legislation for decades.”<\/p>\n
In that regard, Gross cites an op-ed piece in Sunday’s New York Times by former CBO director Douglas Holtz-Eakin, who wrote that rather than reducing the budget deficit by $138 billion over the next 10 years, health-care reform will add $562 billion to the deficit over that span. “Long-term bondholders beware,” he warned.<\/p>\n