Solution to US debt crisis is severe austerity triggered by a fiscal calamity
3 days ago
- #US debt
- #fiscal austerity
- #economic policy
- U.S. debt is unsustainable, with publicly held debt at 99% of GDP and projected to reach 107% by 2029.
- Debt service costs exceed $11 billion weekly, accounting for 15% of federal spending.
- Possible solutions include faster growth, lower rates, default, inflation, financial repression, or fiscal austerity.
- Faster growth is unlikely due to a shrinking labor force; AI won't boost productivity enough.
- Low interest rates are a historic anomaly unlikely to return; default is implausible.
- Inflation or financial repression would be as damaging as default.
- Severe fiscal austerity may be the only viable option, requiring drastic cuts to defense or non-defense spending.
- Political gridlock makes immediate action unlikely, with Democrats resisting program cuts and Republicans favoring tax cuts.
- Austerity may only come after a fiscal crisis, making the adjustment more radical.
- Social Security and Medicare insolvency by 2034 could catalyze fiscal reform, but market reactions may force earlier action.