Friday, July 29, 2016

Is America Headed For Bankruptcy?
Martin Feldstein writes: "Two recent pieces of budget news are a grim reminder of the perilous state of fiscal policy in the United States" .. President Barack Obama’s Office of Management and Budget announced that the federal government’s deficit this fiscal year will be about $600 billion, up by $162 billion from 2015, an increase of more than 35%. & the annual Long-Term Budget Outlook produced by the Congressional Budget Office predicts that, with no change in fiscal policy, federal government debt will rise from 75% of GDP to 86% a decade from now, and then to a record 141% in 2046, near levels in Italy, Portugal, & Greece ,, Feldstein informs: "Here is an amazing and disturbing implication of the CBO’s forecast. By 2046, the projected outlays for the 'mandatory' entitlement programs (Social Security and the major health programs), plus interest on the debt, would absorb more than all of the revenue that the government would collect .. There is no way to offset the growth of the mandatory programs by slowing the growth of defense and other discretionary outlays. Total defense spending is now just 3.2% of GDP and is expected to decline to 2.6% over the next ten years and to remain at that level for the next 20 years. That would be the lowest defense share of GDP since before World War II. The same reduction is projected for all non-defense discretionary programs, also a record-low share of GDP. .. Neither of the presidential candidates has indicated either a plan or an inclination to reverse the projected rise in the national debt. But it should be a top priority for whoever moves into the White House next year. Given the need to act quickly to avoid the worst-case scenario, there is no excuse for waiting."
link here to the essay

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