Now Rick Santorum has dropped out of the Republican nominations for president, former Massachusetts Governor Mitt Romney will face incumbent Democratic Barack Obama.
Yes, 2008 was billed as the election of a generation €" the once-in-a-lifetime chance to get rid of the warmongering neocons and make history with America's first minority commander-in-chief. However back then, the scale of the West's financial troubles were only just becoming apparent.
Today things look very different. The full realisation of China's meteoric rise is beginning to hit, as the penny finally drops that debt and demographics in the Eurozone are condemning the economic union to years of immobility, if not socio-economic deterioration.
Right now Spain is stuck in contraction because it is running a deficit of 8.3% and has debt of 79.8% of GDP. Washington has a budget deficit of 10% of GDP and a national debt of over 100% (and rising). It is now only a matter of time before America must do what Britain has done and fix its debt before the markets react.
Much of Obama's credibility hinges on the Affordable Care Act. But a study by Charles Blahous of George Mason University, found that the bill could overshoot its cost-saving targets, adding $530bn to America's titanic debt levels. The law could boost federal spending by over $1.15 trillion and add $340-530 billion in deficits between 2012 and 21.
Romney pledges to bring federal spending below 20% of GDP, which will require €spending cuts of approximately $500 billion per year in 2016 assuming robust economic recovery with 4% annual growth, and reversal of irresponsible Obama-era defense cuts.€
However findings by the Committee for a Responsible Federal Budget indicate that Romney would add around $250bn to the debt. His reduction of federal workforce costs could trim around $530bn but his reductions on corporation tax could add a further $1 trillion. Romney's tax cutting plans €" cutting marginal rates by 20% €" could add $2.6 trillion.
America's real problem comes from future healthcare and social costs for a rapidly ageing population. Treasury Secretary Tim Geithner did not dispute findings from the Congressional Budget Office that by mid-century, US debt could be 400% of GDP. According to the CBO, said Republican Paul Ryan, €the economy shuts down€ by 2027.
In telling remarks to Congress in 2011, Federal Reserve boss Ben Bernanke said that, €the unsustainable trajectories of deficits and debt that the CBO outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit.€
€One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point. The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will come as a rapid and painful response to a looming or actual fiscal crisis.€
As Government debt increases, the economy will slow down. Federal spending for healthcare will probably double as a percentage of GDP in the next 25 years, because GDP will be much lower than the CBO and others estimate.
Bernanke goes on, €Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living.€
€Moreover, diminishing investor confidence that deficits will be brought under control would ultimately lead to sharply rising interest rates on government debt and, potentially, to broader financial turmoil. In a vicious circle, high and rising interest rates would cause debt-service payments on the federal debt to grow even faster, resulting in further increases in the debt-to-GDP ratio and making fiscal adjustment all the more difficult.€
Recent polls put Obama ahead of Romney. A poll for ABC put Obama 19 points ahead of Romney among females. According to the LA Times, the election could come down to Colorado, Nevada, Ohio and Virginia, if Florida goes for Romney. According to Bloomberg, an election now would see Obama gain 51% of the vote to Romney's 44%.
According to Jagadeesh Gokhale (Federal Reserve Bank of Cleveland) and Kent Smetters (University of Pennsylvania), for America to finance what it needs, by 2008 America would have needed to increase federal income taxes by 74%, increase payroll taxes by 103%, cut federal purchases by 115% or cut social security and Medicare by 47%.
America €" most of whose foreign debt is held by its main geostrategic rival €" will soon be financing the Chinese military through its debt interest payments. As Canadian conservative Mark Steyn put it, €Suppose Beijing decides to seize Taiwan. The U.S. is obligated to defend it militarily.€
€But U.S. taxpayers would be funding both sides of the war €" the home team, via the Pentagon budget, and the Chinese military, through the interest payments on the debt. A Beijing-Taipei conflict would be, in budget terms, a U.S. civil war relocated to the straits of Taiwan.€
The Democrats favour the €Buffett Rule€, named for US billionaire Warren Buffett, €which would require those who make more than $1 million per year to pay a bigger portion of the country's taxes,€ according to David A. Fahrenthold and David Nakamura in the Washington Post.
The proposal favoured by Mitt Romney, as outlined by Republican Paul Ryan, €would revamp Medicare so that future recipients would pay more for the same kind of services. It would also shrink growth in spending on Medicaid and on food stamps.€
But while Buffett's €rule would not likely make a serious dent in the country's deficit. It might add up to $162 billion over 10 years. The national debt grows fast enough to wipe that out within two months€, Ryan's plan €wouldn't balance the budget until 2040, estimates show.€ Neither plan, on its own, is enough. And that is the problem.
Yes, 2008 was billed as the election of a generation €" the once-in-a-lifetime chance to get rid of the warmongering neocons and make history with America's first minority commander-in-chief. However back then, the scale of the West's financial troubles were only just becoming apparent.
Today things look very different. The full realisation of China's meteoric rise is beginning to hit, as the penny finally drops that debt and demographics in the Eurozone are condemning the economic union to years of immobility, if not socio-economic deterioration.
Right now Spain is stuck in contraction because it is running a deficit of 8.3% and has debt of 79.8% of GDP. Washington has a budget deficit of 10% of GDP and a national debt of over 100% (and rising). It is now only a matter of time before America must do what Britain has done and fix its debt before the markets react.
Much of Obama's credibility hinges on the Affordable Care Act. But a study by Charles Blahous of George Mason University, found that the bill could overshoot its cost-saving targets, adding $530bn to America's titanic debt levels. The law could boost federal spending by over $1.15 trillion and add $340-530 billion in deficits between 2012 and 21.
Romney pledges to bring federal spending below 20% of GDP, which will require €spending cuts of approximately $500 billion per year in 2016 assuming robust economic recovery with 4% annual growth, and reversal of irresponsible Obama-era defense cuts.€
However findings by the Committee for a Responsible Federal Budget indicate that Romney would add around $250bn to the debt. His reduction of federal workforce costs could trim around $530bn but his reductions on corporation tax could add a further $1 trillion. Romney's tax cutting plans €" cutting marginal rates by 20% €" could add $2.6 trillion.
America's real problem comes from future healthcare and social costs for a rapidly ageing population. Treasury Secretary Tim Geithner did not dispute findings from the Congressional Budget Office that by mid-century, US debt could be 400% of GDP. According to the CBO, said Republican Paul Ryan, €the economy shuts down€ by 2027.
In telling remarks to Congress in 2011, Federal Reserve boss Ben Bernanke said that, €the unsustainable trajectories of deficits and debt that the CBO outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit.€
€One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point. The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will come as a rapid and painful response to a looming or actual fiscal crisis.€
As Government debt increases, the economy will slow down. Federal spending for healthcare will probably double as a percentage of GDP in the next 25 years, because GDP will be much lower than the CBO and others estimate.
Bernanke goes on, €Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living.€
€Moreover, diminishing investor confidence that deficits will be brought under control would ultimately lead to sharply rising interest rates on government debt and, potentially, to broader financial turmoil. In a vicious circle, high and rising interest rates would cause debt-service payments on the federal debt to grow even faster, resulting in further increases in the debt-to-GDP ratio and making fiscal adjustment all the more difficult.€
Recent polls put Obama ahead of Romney. A poll for ABC put Obama 19 points ahead of Romney among females. According to the LA Times, the election could come down to Colorado, Nevada, Ohio and Virginia, if Florida goes for Romney. According to Bloomberg, an election now would see Obama gain 51% of the vote to Romney's 44%.
According to Jagadeesh Gokhale (Federal Reserve Bank of Cleveland) and Kent Smetters (University of Pennsylvania), for America to finance what it needs, by 2008 America would have needed to increase federal income taxes by 74%, increase payroll taxes by 103%, cut federal purchases by 115% or cut social security and Medicare by 47%.
America €" most of whose foreign debt is held by its main geostrategic rival €" will soon be financing the Chinese military through its debt interest payments. As Canadian conservative Mark Steyn put it, €Suppose Beijing decides to seize Taiwan. The U.S. is obligated to defend it militarily.€
€But U.S. taxpayers would be funding both sides of the war €" the home team, via the Pentagon budget, and the Chinese military, through the interest payments on the debt. A Beijing-Taipei conflict would be, in budget terms, a U.S. civil war relocated to the straits of Taiwan.€
The Democrats favour the €Buffett Rule€, named for US billionaire Warren Buffett, €which would require those who make more than $1 million per year to pay a bigger portion of the country's taxes,€ according to David A. Fahrenthold and David Nakamura in the Washington Post.
The proposal favoured by Mitt Romney, as outlined by Republican Paul Ryan, €would revamp Medicare so that future recipients would pay more for the same kind of services. It would also shrink growth in spending on Medicaid and on food stamps.€
But while Buffett's €rule would not likely make a serious dent in the country's deficit. It might add up to $162 billion over 10 years. The national debt grows fast enough to wipe that out within two months€, Ryan's plan €wouldn't balance the budget until 2040, estimates show.€ Neither plan, on its own, is enough. And that is the problem.
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