Obama is right - the current deficit is unsustainable
http://www.bloomberg.com/apps/news?pid=20601087&sid=abXWfVxx_e8w&refer=home
Obama is right that the current debt load is unsustainable - so why is he proposing a $2 trillion deficit which will stay in the trillions for as long as one can project?
How will he pay for it? Even getting rid of the Bush tax cuts will only produce a few hundred billion a year, which isn't nearly enough. They project much lower medical costs because they assume they are going to figure out a way to cut costs and make things more efficient. I guess no one has tried that before.
The only way to really cut costs is to ration health care, especially health care in the last year of life, which I've seen estimated as 30% of health-care expenses. That will be a tough choice but I don't see what other choice Obama has.
You cannot propose massive spending without either creating crushing debt that the markets will simply not allow, pushing interest rates much higher and really slowing growth and hurting the economy. You cannot increase the debt-to-GDP ratio without limit.
We found the limit on personal and corporate debt this year. We pushed the limits until the system crashed. And now the government wants to do the same thing. They are planning to see where the limits on government debt-to-GDP will be. Unless cooler heads prevail, this is not going to be pretty. Somewhere in the middle of the next decade we will hit the wall, and it will make the current crisis pale in comparison.
The only way to solve the problem is to grow GDP more rapidly than debt, and for that to happen you have to have policies that are shaped for the growth of the economy or massive savings by consumers. And right now we have neither. Cap and trade is hugely anti-growth. So are higher corporate tax rates that will be created by closing loopholes for income earned outside the US. Much better would be to lower the overall corporate level to a competitive world rate and then require the offshore income to be taxed.
Obama is right that the current situation is unsustainable. Let's hope he will do more than just talk and show some budget restraint.
Obama is right that the current debt load is unsustainable - so why is he proposing a $2 trillion deficit which will stay in the trillions for as long as one can project?
How will he pay for it? Even getting rid of the Bush tax cuts will only produce a few hundred billion a year, which isn't nearly enough. They project much lower medical costs because they assume they are going to figure out a way to cut costs and make things more efficient. I guess no one has tried that before.
The only way to really cut costs is to ration health care, especially health care in the last year of life, which I've seen estimated as 30% of health-care expenses. That will be a tough choice but I don't see what other choice Obama has.
You cannot propose massive spending without either creating crushing debt that the markets will simply not allow, pushing interest rates much higher and really slowing growth and hurting the economy. You cannot increase the debt-to-GDP ratio without limit.
We found the limit on personal and corporate debt this year. We pushed the limits until the system crashed. And now the government wants to do the same thing. They are planning to see where the limits on government debt-to-GDP will be. Unless cooler heads prevail, this is not going to be pretty. Somewhere in the middle of the next decade we will hit the wall, and it will make the current crisis pale in comparison.
The only way to solve the problem is to grow GDP more rapidly than debt, and for that to happen you have to have policies that are shaped for the growth of the economy or massive savings by consumers. And right now we have neither. Cap and trade is hugely anti-growth. So are higher corporate tax rates that will be created by closing loopholes for income earned outside the US. Much better would be to lower the overall corporate level to a competitive world rate and then require the offshore income to be taxed.
Obama is right that the current situation is unsustainable. Let's hope he will do more than just talk and show some budget restraint.
