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3 Things You Need to Know on U.S. Long-Term Fiscal Outlook
Posted by Randy | June 23, 2011
Economists Kenneth Rogoff and Carmen Reinhart have noted that debt-to-GDP ratios of over 90 percent are associated with lower economic growth and increased risk of a severe debt crisis.  In its latest report on our nation’s Long-Term Fiscal Outlook, the nonpartisan Congressional Budget Office says that total U.S. debt will cross that tipping point and surpass 100 percent of the economy by the end of this year. Debt held by the public (overall national debt includes inter-government holdings) will overtake the economy in ten years.

Here are three things you need to know from the latest CBO report:

Our debt will prevent the creation of jobs.
According to CBO, “Growing debt also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government's ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates. Such a crisis would confront policymakers with extremely difficult choices.” Read more.

Government healthcare spending will double over the next two decades.
According to CBO, real government spending on mandatory healthcare as a percentage of GDP will nearly double, from 5.6 percent in 2011 to 10.4 percent of GDP by 2035.  Because healthcare cost increases cannot be contained, healthcare spending will help drive our debt from 70 percent of GDP today to 187 percent of GDP in 2035. Read more. 

Our debt is causing an increased chance of fiscal crisis, like we saw in Greece.
CBO says our uncontrolled debt has increased the chances of a fiscal crisis in which investors would be unwilling to loan more money to the government.  According to CBO, in the face of such a crisis, “the government would need to undertake some combination of three actions: restructuring its debt (that is, seeking to modify the contractual terms of its existing obligations); pursuing inflationary monetary policy (that is, increasing the supply of money); and adopting an austerity program of spending cuts and tax increases.” Read more. 

Read about the budget proposal I support, “The Path to Prosperity,” which would put us on a path to balanced budgets without resorting to growth-killing tax hikes.
Comments
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  • David Meyer commented on 6/25/2011
    David Meyer commented on 6/24/2011 All our problems are rooted with oil ---- SS, Medicare, budget, jobs... whatever you can think of can be solved easily if we focus on solving 1 problem... energy. We consume roughly 19Million Barrels Oil / Day. Top producing countries: Russia: 9.9 MBD Saudi Arabia: 9.7 U.S.: 9.1 Yes, it is true that we don't import from the hostile countries for the most part So where does the U.S. get the 9.67 million barrels a day of oil we import? It turns out our biggest suppliers are North American neighbors. At 100/barrel.. That's 1 billion dollars/day bleeding out of this country and it doesn't matter if it's our neighbor. Just think of the problems we could solve in this country if all this money wasn't hemorrhaging out of our country. Just go to Saudi Arabia and take a look at their problem...(nothing like the problems we have here). I have an idea... why don't we tax imported oil like we did cigerettes and turn the money into small business loans and incentives to promote USA energy. Nearly 100% of electric is produced here in the good ole USA. I don't care if we promote natural gas, nuclear, drill-drill-drill (all the above) or whatever as long as we can stop the hemorrhaging. We need some leadership to put America on the right path! And the only way to put us on the responsible path is to hit the consumer in the wallet (demand destruction)... It worked for cigerettes.... imported oil is bad for America no matter how you look at it. See full article from DailyFinance: http://www.dailyfinance.com/2011/02/28/surprising-facts-about-us-and-oil/?icid=sphere_copyright
  • VC Independent commented on 9/6/2011
    interesting look on what the US outlook will be. http://www.vcindependent.com/
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