Deficits

The question is: How close is America to fiscal crisis?

Posted on Thursday, February 17, 2011

The Congressional Budget Office projects that America's 2011 deficit will be $1.5 trillion, or 9.8% of GDP, and debt held by the public in the 2011 fiscal year will approach 70% of GDP. How close is America to facing a bond market crisis? Should drastic cuts to the budget be made now? Over what horizon should they extend? And what balance between tax increases and spending cuts should be struck?
Or is the entire underlying premise of the question mistaken? Can America count on a return to growth to solve most of its near-term budget problems? And how should other economies approach America's fiscal morass?
The Economist


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