Bloomberg Opinion
Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
Double Our Taxes..
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Worse Than Greece
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
(snippet)
Worse Than Greece
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
There is no question about it, the excrement is about to really hit the fan! The ugly signs are all around us here on the east coast. Thousands of square feet of office space for sale or lease. Homes suddenly abandoned with uncut grass growing up around them. Some homes are even burned. I have to wonder why. Either an attempt to cash in on insurance just before forclosure, or the idea "If I can't keep my house, then nobody is going to get it either!". All this going on in our area and the worst have not even hit yet; the collapse of the dollar! God help us!
ReplyDeleteMeow!
ReplyDeleteHoly cow! I am now paying 33% federal and state income tax, plus my 8.55% FICA share.
ReplyDeleteDoubling would mean having 83% of my gross income taken away (or even 91.5% if my employer won't carry his part of FICA doubling).
To the many Australian and Canadian visitors, yes things are a mess here in the States. Don't believe the talk of recovery. We are in a depression!
ReplyDelete08.25.10
ReplyDeleteThe Bush tax cuts have been in effect continously during the past two years. Where are the jobs they're supposed to create? Repeal the Bush tax cuts and let Republicans pay for the jobs they shipped offshore. They've pocketed the wealth and shot themselves in the foot politically.
ReplyDeleteI repeat, the Bloomberg article is a piece of crap. It's written by another really rich guy who thinks squeezing the poor and elderly and disabled will solve the financial problems. Not a word about the massive fraud on Wall Street or the money these guys pay themselves.
ReplyDeleteIf there continue to be cuts in aid to the average American, along with more taxes and higher prices, we will see massive social unrest. Maybe I'll finally get to see a crowd burn down Citibank. Can't wait.
America has not seen half of what they have coming to them
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