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Thursday, June 8, 2006
Unsustainable: A sad song
America, it's time to get ready for a significant tax increase. Screech! We know those words sound off key, especially if you listen only to the Tax-Cut Chorus.
But consider this: Unless the country makes a significant course correction, in just six years the United States will lose its top credit rating, the AAA ranking for U.S. Bonds. A decade or so after that, dropping bit by bit, U.S. bonds could hit "junk" status, putting what has been the safest investment in the world on par with speculative bonds from Brazil.
And just where does this looney tune come from? Well, Standard & Poor's, which has been rating bonds since 1941. Its chief economist, David Wyss, ran the numbers to see what would happen to the United States (and other nations) because of an aging work force.
Wyss found that the U.S. government's debt levels will reach 350 percent of gross domestic product by 2050 (up from about half the economy today) and budget deficits will balloon to almost 30 percent of GDP (from about 4 percent now). He said in The Wall Street Journal that "things have gotten worse" since his last examination, because of the Medicare prescription drug program. "It's added cost and no revenue," he said.
Should the country double or triple the taxes from its citizens to pay for it all? Of course not. But the alternative is trimming federal spending now.
A recurring melody haunts us: "Unsustainable -- in every way. Unsustainable -- that's what we say. That's why, darling, deficit are regrettable, too." Sorry, Nat.
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