[T50_Omaha8]

[ QUOTE ]
A change in PV due to a change in interest rates is real. If you try to sell the payment stream using old interest rates buyers won't pay that price. There's nothing more real than that.

[/ QUOTE ] Right. But we're not actually trying to invest money at any interest rate. He shows the following figure:

Fiscal Exposures
2000: $20tn
2005: $46tn

The main cause of the increase in this figure is the decrease in interest rates. But he wants the viewer to extrapolate this trend and conclude that fiscal obligations will continue to spiral out of control at this pace, even though that is completely unlikely (as it would require interest rates to continue to decrease from below their 2005 level).

He chose the first year, 2000, so interest rates were very high, causing the first value to be as low as possible, and the second year, 2005, so interest rates were very low, causing the second value to be as large as possible. This makes the increase over the time period especially pronounced, driving home his point that healthcare and social security costs are spiraling out of control. When he says, "from 20.4 trillion to 46.1 trillion in FIVE YEARS," he clearly doesn't want us to consider that interest rates are the main cause of this increase. Hell, if you had told any economist that a) the PV of fiscal exposures over the next 75 years in 2000 is $20tn and b) interest rates decreased between 2000 and 2005, he would easily say, "ah, then the PV of fical obligations must have gone up!" The fact that the PV went up that much isn't substantial. It's trivial.

His tactics are a great way to win people over, but they're also very misleading.