Skip to comments.Now they tell us...
Posted on 01/21/2011 11:48:07 AM PST by jazusamo
At the Federal level the combination of ongoing weakness in the labor market and large structural budget deficits means the right policy mix should be more stimulus now and more deficit reduction, enacted now, to take effect in two to three years. Policymakers have acted on the first part, most prominently through the payroll tax holiday announced in December...
They have not, however, undertaken the harder work needed to reduce projected deficits over the next decade. Most fundamentally it is difficult to see how the medium-term federal deficit can be reduced to sustainable levels without additional tax revenue from those earning less than $250,000.00 a year. [Italics added]
If policymakers will not act before we have a fiscal crisis at the federal level, a fiscal crisis we will have.
The bottom line is that there may well be US public debt tremors this year, both during federal debate over raising the debt ceiling and with at least a limited number of crises in local and city governments. The bigger problem, though, lies beyond 2011, as the unsustainablity of the federal government's fiscal trajectory becomes increasingly clear. I hope it does not ultimately require a crisis to restore fiscal sustainability at the federal level, but I fear it will.
They’ll just blame it on the Republicans’ refusal to raise taxes.
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