In case you haven’t been paying attention, America’s fiscal situation is in deep crisis on too many fronts. It starts with our national debt, which approaches $35 trillion and is growing at an alarming pace, driven by a deficit that is twice the historical average as a percentage of gross domestic product (GDP).
America’s fiscal turmoil is the elephant in the room. Anyone can see it. From the International Monetary Fund, Congressional Budget Office, U.S. Treasury Department, Federal Reserve System, as well as JPMorgan Chase’s Jamie Dimon and Citadel’s Ken Griffin, Black Swan author and former quantitative trader Nasim Nicholas; Everyone from the financial services industry to Mr. Taleb has used expressions akin to the phrase “unsustainable fiscal path” to describe America’s economic foundations.
Actions have consequences, and austerity poses an unpleasant reality in the process of restoring economic balance.
Even the corporate press, which has long interfered with the U.S. government, is sounding the alarm.Recent Los Angeles Times report, International Monetary Fund Managing Director Kristalina Georgieva praised the strength of the U.S. economy, but warned that current levels of deficit spending are unsustainable and could undermine U.S. and global growth if unchecked. did.”
Without action, a crisis seems inevitable, but there appears to be no political will to do anything to repair and restore America’s financial footing.
As Bloomberg’s Niall Ferguson says, share His namesake, Ferguson’s Law, states: “A great country that spends more on debt servicing (interest payments on its national debt) than on national defense cannot remain powerful for long.”
economist recent articles He said the U.S. fiscal outlook is “dire but forgotten.” But the longer something remains forgotten, the harder it becomes to save it.
Argentina has been held up as a model of what can be done. Argentina is an economy that has been plagued by debt and corruption for more than 100 years, and is considered an outlier in its behavior, with a dire state of affairs that includes massive inflation and real poverty for the majority of its population. The financial situation was finally resolved. It gave Argentines the fortitude to elect a president who would do things differently.
Argentina’s new liberal president, Javier Millay, campaigned with a chainsaw and promised deep cuts to government spending. He kept his promise. He abolished entire ministries and fired tens of thousands of government employees from his first day in office.
These moves have been praised in many quarters, as Argentina announced it achieved a budget surplus of $315 million in the first quarter. According to Reuters“First time since 2008.”
Millay’s actions come at a cost, but those costs are not often discussed by those who heaps praise on.
Actions have consequences, and austerity poses an unpleasant reality in the process of restoring economic balance.
As of the end of the first quarter of this year, Argentina’s industrial production was down more than 21% on a year-over-year basis.Reuters Note“While Millais’ ‘chainsaw’ cost-cutting program delivered an unusual budget surplus at the beginning of the year and allowed the central bank to rebuild its reserves, the economy is in a predicament.”
That’s the reality. When reductions occur, there are consequences. This could mean a recession, which may be necessary to shift “growth” from government to the private sector. And it would be painful, unpopular, and could mean political suicide for anyone who tries it.
Difficult times often create paths to opportunity, especially when a country’s economic engine is given an opportunity to thrive.
That’s the choice Americans face. It is impossible to maintain the current fiscal path. Unless there is a perfect “Goldilocks” scenario with growth, government spending will have to be cut and we will have to face the consequences of the cuts. Otherwise, we will have to monetize our debt, further destroying purchasing power and opening up a huge gulf between elites and Main Street Americans.
This is a difficult choice, and one that the American people cannot make without forcing their representatives to make such difficult decisions. But without massive protests, phone campaigns, and attention, there’s no doubt that nothing will happen.
Does America have the courage to do the right thing to preserve her country? We still have time, but it will take enormous mental strength and patience to do so. We don’t want to become Argentina before we are forced to change.
