Macleans is running an article about the current unsustainable fiscal policy in the US.
I originally saw this on Bound By Gravity. He’s asking for some comment from any economists or others with a different point of view. Please go visit if you’d like to comment.
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You may look at that headline and say, “Oh, here we go for more America bashing” but no, this is not about deriding America, it’s about being hyper-aware of what’s happening in the economy of our largest trading partner. If all the deficits, and debt and tax cuts eventually catch up to the US economy and lead to a recession, then Canada will be going along for the ride no matter how good our fiscal plans are.
While it was more of a “sub-reason” than an issue at the forefront, this is another justification for opposing the war in Iraq and the massive military buildup occuring in the US. Billions and Bilions of dollars are being pumped into the military when they should be spent on shoring up the economy and diminishing their reliance on foreign capital.
This quote really says it all:
But Walker isn’t a lobbyist or an activist, he’s an accountant. His title is comptroller general of the United States, which makes him the head auditor for the most important and powerful government in the world. And he’s desperately trying to get a message out to anyone who’ll listen: the United States of America’s public finances are a shambles. They’re getting rapidly worse. And if something major isn’t done soon to solve the country’s intractable budget problems, the world will face an economic shakeup unlike anything ever seen before.
A particularly stunning part:
Walker’s department projects that, under the current tax rates, interest costs on the skyrocketing national debt would be about half of all government tax revenues by 2031. Ten years later, the cost of servicing the debt will exceed all government revenues.
That means that if nothing changes by 2040 (when I’m 73) the US won’t be able to collect enough taxes to even pay interest on its’ Debt!
Now obviously that is not going to happen because at some point the people lending the US its’ money will simply stop. The banks would obviously slap me down if I just kept borrowing and borrowing and never repaying. Someone needs to get the USs’ Fiscal House in order… and it looks like it will be the American Taxpayer that will have to realise that they have to pay more if they want their economy to have any chance.
the positive short-term economic outlook is playing out against a backdrop of concern about the prospects for the federal budget, especially over the longer run. Indeed, the unified budget is running deficits equal to about 3-1/2 percent of gross domestic product, and federal debt held by the public as a percent of GDP has risen noticeably since it bottomed out in 2001. To be sure, the cyclical component of the deficit should narrow as the economic expansion proceeds and incomes rise. And the current pace of the ramp-up in spending on defense and homeland security is not expected to continue indefinitely. But, as the latest projections from the Administration and the Congressional Budget Office suggest, our budget position is unlikely to improve substantially in the coming years unless major deficit-reducing actions are taken.
This guy really is the most powerful man in the world, isn’t he.
One more thing. We all know that these problems are in large part due to the aging Baby Boomer population around the world. Well, according to Eschaton, President Bush has backed down on his massive reform of the US Social Security system. What does this mean for the economic prospects of the US going forward? Hard to say, but at least it seems Bush has realized that his grand scheme of tax cuts+personal “accounts” just won’t work to save Social Security… or save the US from Social Security itself.