Between 2001 and 2011 the running budget of U.S.

stopped working properly due to two recessions, tax cuts and two wars. The government spent more money than brought in and this led to borrowing more and higher interest rates than Congressional Budget Office (C.B.O.) estimated. Projections today show the seriousness of lowered output and depressed tax revenues. Federal public debt totals $10 trillion today according to U.S. Treasury, and C.B.O. projects it to reach $20.3 in 2020. While it is rising, what is more worrisome is the debt- to-GDP ratio. For the first time since World War II, the deficit for 2010 exceeded 10% percent of GDP. Political leaders have decided to spend and invest less money in the economy with a 10-year budget window. However, at this stage there are concerns that this plan might increase unemployment, lower the growth making the economy even more fragile. Economists are thinking that although U.S. should pay its debts, it would be better to wait for several more years for the economy to be stronger. The current budget plan underlines the broad-based revenue and aims to stabilize public debt in 2014 returning it to %40 of GDP in 2035, but is not efficient enough to reach fiscal goal to lower the debt in long term. It is likely to increase the pressure on the Federal Reserve causing the risk of deflation to grow. Also, significant increases in social security and health-related spending should not be taken too lightly. Every year, healthcare consumes a large share of GDP. There is an inevitable need to secure long term fiscal sustainability and the absence of a proper budget plan or a fiscal strategy is making U.S. economy unsustainable. ---

The Washington Times

Friday, March 26, 2010

http://www.washingtontimes.com/news/2010/mar/26/cbos-2020-vision-debt-will-rise-to-90-ofgdp/?page=all Binyamin Appelbaum and Catherine Rampell New York Times July 31, 2011

http://www.nytimes.com/2011/08/01/us/politics/01econ.html?_r=1&pagewanted=all The Budget and Economic Outlook CBO John Lipsky, First Deputy Managing Director, International Monetary Fund http://www.imf.org/external/np/speeches/2011/010811.htm