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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.
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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/
  • Tom Sadler commented on 12/26/2013
    Every House and Senate Member should be required to publicly state what they will do to save our country when we reach the $20 Trillion in debt and interest rates normalize at 5%. Interest on the debt will triple what it is now and the growth in revenues that Mr. Meyer speaks to will be wasted in interest payments . We the people should let the Congress know that Nationalizing IRA and 401K accounts to buy Treasuries would be unacceptable as would the European solution of confiscating bank deposit accounts of over $100,000 as they did in Cyprus. Governments in dire straights have proven their ability to sustain themselves at huge cost to citizens. Don't for a minute think it would never happen here. The Congress and the president could begin a fix now unless the plan is just keep getting elected and worry about it after the debt crisis goes into overdrive. The problem is obvious. The fix is tough on us and politically for our leaders a real hard thing to explain and get the buy in from the people. I'm praying that someone will lead. Maybe a bipartisan group of House and Senate members taking the real numbers and the consequences of our debt to the American people via a UTube presentation that can be the beginning of a campaign to educate Americans on what is happening can get a groundswell of public opinion and media buzz going. Heck it might even show that both parties actually can work together on something.
  • Diane Starnes commented on 6/18/2014
    Unfortunately, I believe there is nothing we can do at this point to improve our financial situation. The govt has been spending too much money for too long and will never even be able to pay off its interest on our debt, much less the debt itself. And while the rest of the nations of the world see the problem and are on a fast tract to devalue the US dollar as the reserve currency of the world some countries and even financial institutions in the US are no longer accepting US dollars. Where does that leave us? In a position for nothing but an eventual decline/disaster.
  • Steve Faherty commented on 8/6/2015
    Representative Forbes, Thank-you for your service. In reference to the IMF meeting on 20 October and a different reserve currency other than the dollar. What can we expect from that. Should I start storing food and water? Are we going to have chaos? Thank-you for any information you can provide. Steve
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