U.S. risks fiscal crisis, Congressional Budget Office warns

On 15 August 2008, the total U.S. public debt outstanding was just over $9.6 trillion (or if you're a stickler for accuracy, $9,606,975,957,798.46). Four years later, on 15 August 2012, the total public debt outstanding for the United States had risen to just over $15.9 trillion (or rather, $15,919,488,010,442.70). In four years then, the U.S. national debt rose by more than $6.3 trillion, or by 65.7% of its value in 2008.

Nice issue brief just released by the Congressional Budget Office.  It explains that besides the “gradual consequences” of the gradual worsening of the fiscal outlook, there are these shorter-term risks to the economy:

As previously noted, according to the Congressional Budget Office, if congress sticks by current law the fiscal situation is more-or-less okay for the next 20-25 years. It’s also true that according to the CBO and most everyone you meet, Congress seems unlikely to do that. So the message here should be: “Congress! Don’t live up to your bad reputation!

By Simon Johnson

President Obama submitted a 244-page budget proposal on Wednesday for next year—a tome that met with instant criticism before anyone could read it.

House Republicans are certain that the national debt has grown large enough to crush the U.S. economy, so they passed a budget that slices away much of what they see as a bloated Federal budget.

By Simon Johnson The United States faces some serious medium-term fiscal issues, but by any standard measure it does not face an immediate fiscal crisis.  Overindebted countries typically have a hard time financing themselves when the world becomes riskier – yet turmoil in the Middle East is pushing down the interest rates on US government debt.  We are still seen as a safe haven. Yet leading commentators and politicians today repeat the line “we’re broke” and argue there is no alternative other than immediate spending cuts at the national and state level. 

Annie Lowrey at the NYT has a story that is of utmost importance. It's about the bombshell news that the growth spending on healthcare is in rapid decline.