Monday, February 4, 2013

Debt Crisis Continues


For John, BLUFFrom a Fiscal pont of view the US is in trouble, on the way to creating a new acronym, "US PIGS".  Nothing to see here; just move along.

Below I have quoted a short portion of a longer paper by Mr Ron Boehmer, from the Committee for a Responsible Federal Budget.  The paper is Our Debt Problems Are Far from Solved.  There you have it, in a title.  Incidently, I have deleted foot notes from this extract.

Given the deficit reduction enacted in the 2011 Budget Control Act (BCA) and the recent American Tax Relief Act (ATRA), several commentators have suggested that the task of controlling the debt is almost complete.

President Obama recently remarked that "the consensus is we need about $4 trillion to stabilize our debt and our deficit, which means we need about $1.5 trillion more."  The Center on Budget and Policy Priorities, meanwhile, has argued that $1.4 trillion of additional deficit reduction would be sufficient for the time being.  And then there is columnist Paul Krugman, who writes that the deficit is "a problem that is already, to a large degree, solved."

While the deficit reduction enacted to date represents notable progress, our debt problems remain far from solved.  By our estimates, lawmakers have achieved only slightly more than half of the minimum necessary deficit reduction to achieve sustainability over the next decade (and less than 40 percent of the savings in the Simpson-Bowles plan), only one third of the deficit reduction needed through 2040, and only one sixth of the deficit reduction needed through 2080.  Moreover, much of the savings already enacted represents the easier "low-hanging fruit" of deficit reduction.

Despite the $2.35 trillion in enacted savings, debt remains on an upward path -- on course to exceed 100 percent in the early 2030s, 200 percent in the 2050s, and 300 percent in the 2070s.  These levels are clearly unsustainable.

Rather than allowing the debt to grow or just barely stabilize the debt, lawmakers must put the debt-to-GDP ratio on a clear downward path.  This will require at least $2.2 trillion in new savings through 2022 and substantially more over the long-run.  By doing so, lawmakers would be able to provide wiggle room in case projections change, fiscal flexibility to deal with unforeseen events, and increasing the chances that debt will remain under control through at least the next few decades -- not to mention the economic benefits of lower debt levels.

Agreeing to $2.2 trillion in tax and spending changes will not be easy.  But in our view, it is the absolute minimum necessary to ensure the debt is on a sustainable path.

For more information, contact Mr Ron Boehmer by phone: (202) 596-3611 or e-mail: Boehmer@CRFB.org.

Who do we contact if we are concerned?

Regards  —  Cliff

  PIGS stands for Portugal, Italy, Greece and Spain.  Sometimes it is PIIGS, with Ireland the second I, although I think that economically they aren't near as in trouble as the others.
  Alice Rivlin is on the Board of Directors, which suggests to me it is a seriouos organization.

1 comment:

Neal said...

Krugman is a certifiable idiot and walking proof of the abject failure of our higher education system in America. We won't even go there regarding the comedy that has become the Nobel Prize system.

All the fancy talk and multisyllable words does not "make it all better." It is simple logic.....pathetically simple. "Deficit" means you don't have enough money to buy what you want or need. Debt means that you went out and borrowed money you didn't have on your own. Now, you not only have spent money you don't have which in practical terms only worsens your deficit issue because debt is subtracted from assets right out of the blocks. Spinning in one's ruby red slippers reciting "this isn't Kansas any more" doesn't mean you are no longer in Kansas.

The Federal, state, and local governments need to stop giving goods and services it can't afford to people who can't provide it for themselves. Its that simple. Stop spending money on the credit card.

BTW.....one of the greatest obscenities found in government today is the assumption that the people provide revenue. In classic terms, revenue is derived from goods or services bought from a vendor. It isn't revenue that they government extracts...it is tribute forceably taken.