Alan Blinder sees the light, but it turns out to be a train coming right at the US. At average fiscal 2011 rates, receipts cover only about 60% of expenditures. So if we hit the borrowing wall traveling at full speed, the U.S. government's total outlays—a complex amalgam that includes everything from Social Security benefits to soldiers' pay to interest on the national debt—will have to drop by about 40% immediately. How in the world do you do that? No one really knows...That translates to roughly $1.5 trillion at annual rates, or about 10% of GDP. That's an enormous fiscal contraction for any economy to withstand, never mind one in a sluggish recovery with 9% unemployment. Even contemplating such a possibility is evidence of a dark, self-destructive impulse.
No, it would not be a dark impulse, but simply dealing with reality. The US has been on an unsustainable course for years. What can't continue forever, won't. |