LetÃ¢â‚¬â„¢s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: Ã¢â‚¬Å“Directors welcomed the authoritiesÃ¢â‚¬â„¢ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.Ã¢â‚¬Â
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: Ã¢â‚¬Å“The U.S. fiscal gap associated with todayÃ¢â‚¬â„¢s federal fiscal policy is huge for plausible discount rates.Ã¢â‚¬Â It adds that Ã¢â‚¬Å“closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.Ã¢â‚¬Â
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.