Wednesday, April 15, 2009


Marty Sullivan at on what our future looks like:

....One or more of the following must happen: (1) taxes increase significantly; (2) entitlements are cut significantly; (3) economic growth exceeds anyone's wildest hopes and saves the day; or (4) the debt ratio continues to skyrocket, threatening inflation and financial turmoil.

Of course, our leaders always want to avoid 1 and 2 as they hope for 3. The news here is that 4 can no longer be ignored. Every year of delay brings the day of reckoning a little closer and makes the steps for avoiding it even more painful. 

How painful? Projections under the Senate plan would leave the debt-to-GDP percentage at about 60 percent at the end of 2010 (when, hopefully, the recession will have run its course) and at about 120 percent at the end of 2030. To keep the debt-to-GDP percentage at 60 percent (keeping the ratio of debt-to-GDP constant meets the economists' standard of sustainability), the government would have to cut spending or increase taxes to reduce the deficit by 2.7 percent of GDP each year. In 2009 that is $380 billion.

More here.  (via Zero Hedge)