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Wednesday, June 20, 2012

U.S. Debt Problem Won't Be Solved by Austerity Policies | Business | TIME.com

U.S. Debt Problem Won't Be Solved by Austerity Policies | Business | TIME.com
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  1. RAYLOKEJune 20, 2012 at 2:31 PM

    two reports that seem to justify contradictory fiscal policies. The first calculated that the U.S. economy could be thrown into recession because of existing legislation to reduce the deficit sharply next year (the so-called fiscal cliff). The second projected that the U.S. will face an eventual financial crisis if the deficit is not reduced sharply. So what are we supposed to do? Obviously, America’s debt is a problem — but is it a clear and present danger, or just something we need to deal with as circumstances permit? To understand how to make smart policy choices that address both these issues, it’s helpful to take the debt numbers apart.

    There are lots of ways to calculate debt. All the sources have different numbers. And all the figures are slightly out of date. So let’s proceed by setting some approximate benchmarks. If you compare the debt of national governments to their countries’ annual gross domestic product (GDP), the European Union averages 83% and Canada around 85%. Call that normal. Individual European countries that are in the worst financial shape have debt levels that are a lot higher — see Italy’s 120%. Call that bad.



    Read more: http://business.time.com/2012/06/12/how-dangerous-is-americas-debt/?iid=biz-article-editpicks#ixzz1yN5ifJUo

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