Thursday, March 24, 2011

Fiscal update

A number of former chairmen and chairwomen of the president's Council of Economic Advisers have co-authored an important opinion piece in today's Politico. Key excerpt:
There are many issues on which we don’t agree. Yet we find ourselves in remarkable unanimity about the long-run federal budget deficit: It is a severe threat that calls for serious and prompt attention. 

While the actual deficit is likely to shrink over the next few years as the economy continues to recover, the aging of the baby-boom generation and rapidly rising health care costs are likely to create a large and growing gap between spending and revenues. These deficits will take a toll on private investment and economic growth. At some point, bond markets are likely to turn on the United States — leading to a crisis that could dwarf 2008. 
Then we have this from the president of the Dallas Federal Reserve:
"If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when."
Houston, we have a problem. Right now in politics the most important cleavage we find is between those who acknowledge this reality and those who remain willfully blind.

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