Monday, October 26, 2009

Did I Forget To Mention The Argentines And You?

It has been generally accepted that a country's economy is a good credit risk as long as its debt remains in the 50% range of that nation's annual Gross Domestic Product.  Per the GAO the prospects for the United States are as follows:
Debt Held by the Public as a Per Cent of GDP
There are three options a country has to avoid complete economic collapse:  1) raise taxes, 2) cut spending and 3) inflate the value of the currency.

Per the GAO: revenue would have to be increased by 47% and noninterest spending cut by 33% or a combination of the two over the next 75 years to keep debt at the same level as the end of 2008 (40.8% of GDP).  Waiting another ten years to address this issue would require a revenue increase of 58% and noninterest spending cuts of 39% or a combination of the two.

Yet the Congress is discussing a Health Care Reform bill that could add over 5 Trillion dollars in new spending over the next 30 years and a Carbon Cap and Tax bill which will hamstring the economy