dr. meltzer received his b.a. from duke and his ph.d. in economics from the university of california los angeles. next we will be hearing from mr. chris edwards, currently the director of tax policy studies at the cato institute, editor of the cato website. before he began his work at kato, he was a senior economist for the joint economic committee, as well as an economist for the tax foundation from 1992 until 1994. he is also the author of "downsizing the federal government." mr. edwards holds a b.a. and m.a. in economics. our final witness is dr. laurence ball. he is a professor of economics at johns hopkins university. he previously taught at princeton university and new york university. dr. ball has done extensive research and writing on a variety of economic topics, including the foundation of keynesian economic models, in- depth studies of inflation and monetary policy in both the united states and in high inflation countries with a specific focus on how best to reduce inflation and economic cost of inflation. dr. ball is currentl

dr. meltzer and mr. edwards to respond, we are a long way away from that. look at treasury debt right now. it is dropping down below 1.9% and soth, the ns .. there, there is a tremendous appetite for treasury debt. this is an indication that we are a long way from that tipping point. what either of you like to respond to that? >> first, i would say the size of the unfunded mandate does not -- is thought included in most of the numbers that we talk seven timessix to the size of the deficit, depending on what interest rate you use. that is an enormous amount, just as the chart shows. mr. ball and i agree. is the medicare and medicaid expenditure -- if is the medicare and medicaid expenditure that is going to cause the problem. it pales in in significance compared to medicare and medicaid. there are a lot of things that we can do. and they do not require taking away promised benefits to people. for example, and one of many examples, we have to ask why do we spend about 50% of the medicare money on people who within six months of dying, now they don't all die,

dr. meltzer just because i've got time. what -- how do you respond to those people who say in spite of all this that we have considerably more debt that we can run up and that the evidence of that is the appetite for and the low interest rate on treasury bills? >> the reason we have the low interest rate is because the fed enforces it. i mean, if you want to look at where the pressure is coming from, look at the fact that the dollar has depreciated by about 15% against the weak currency like the euro by even a larger percent like the weak currency like the japanese yen. that the most recent inflation number was 3.8%, well above the fed's target. so i don't buy the argument that in a weak economy, you don't get inflation. you gave the example of germany. spain at the moment has 20% unemployment. prices are rising. britain has a high unemployment rate and prices are rising. so there are other sources other than the labor market to give you inflation and we're going to get them. >> mr. edwards? >> there's these gigantic negati

dr. meltzer, maybe i will go to you first on this. we're clearly uncharted territory right now. we can have different opinions on that, but the federal reserve interventions are unprecedented. stimulus spending is at the end of unprecedented levels. the week and almost nonexistent recovery, and despite the incredible levels of spent -- of stimulus spending, is unprecedented. so out of these factors affect the nearness to the tipping point? we cannot determine where that is, but where are we going to borrow the money from? we are projecting a trillion dollars a year that we have to borrow or print. we're is that going to come from? are we in such uncharted territories now but we need to do more than just sound an alarm? orion might unnecessarily rigid or am i a necessarily seeing a bleak situation? -- or am i unnecessarlily seeing a bleak situation? is to enter at percent of gdp in has been for a couple of decades. -- 200% of gdp and have been for couple of decades. that is a real problem. as the cbo points out, if we keep this up, we will produce gdp but a bigger chunk of that w

dr. meltzer and mr. edwards to respond, we are a long way away from that. look at treasury debt right now. it is dropping down below 1.9% and so forth, the auctions are there, there is a tremendous appetite for treasury debt. this is an indication that we are a long way from that tipping point. what either of you like to respond to that? >> first, i would say the size of the unfunded mandate does not -- is thought included in most of the numbers that we talk seven timessix to the size of the deficit, depending on what interest rate you use. that is an enormous amount, just as the chart shows. mr. ball and i agree. is the medicare and medicaid expenditure -- if is the medicare and medicaid expenditure that is going to cause the problem. it pales in in significance compared to medicare and medicaid. there are a lot of things that we can do. and they do not require taking away promised benefits to people. but changing them -- for example, and one of many, we have to ask why do we spend about 50% of medicare money on people who are within six months of dying? f