The CBO Looks Ahead to a U.S. Fiscal Disaster

Barron's ^ | July 23, 2016 | THOMAS G. DONLAN

[reaganaut1]

The American debt problem was almost entirely ignored at the Republican National Convention last week, and we can expect nothing more when the Democrats gather this week.

Both parties support the entitlement spending system and the decrepit tax system that fails to support it. They compete on the fiscal side of politics with impossible promises to spend more and tax less.

Imagine the U.S. Treasury as an airplane beginning to roll down the runway to take off. For a mile or so, the plane gains no altitude, then the wings start to generate lift. The wheels leave the ground and are retracted so the plane can fly smoothly through the air. Then the plane begins a rapid ascent, taking only a few minutes to arrive at an altitude of 30,000 feet.

For the time being, the Treasury is rumbling down the runway, already moving too fast to abort a takeoff. After takeoff, Americans will discover that Treasury debt is heading for the stratosphere, with consequences that are easy to imagine, hard to believe, and apparently impossible to act upon—except to make it worse.

More likely, Americans will remain blissfully unaware of the size of the problem until it’s too late.

The Congressional Budget Office issues a Long-Term Budget Outlook every year. To sum up this year’s report in one sentence, it says, “The federal budget outlook is projected to worsen considerably over the next three decades under current law, with debt growing larger in relation to the economy than ever recorded in U.S. history.”

By 2035, federal debt held by the public as a percentage of gross domestic product will surpass the peak of 106% set in 1946, and it will keep growing from there.

[Foundahardheadedwoman]

‘The USA has the capability to produce every product made int world. It just lacks the will. They build factories every day in the rest of the world. They is noting magic about it.’

You are absolutely right. My thought is that it can’t happen quickly. Presently S. Korea makes all wiring harnesses for US autos and all tv’s and they do a good job. The tariff idea is a good one and will work. The problem is building new plants, the old ones no longer exist. We are looking at a lag time of at least 3 years from the tariffs becoming law. That is what I think at least.