Op-Ed: U.S. Must Control Deficit to Avert Economic Decline (click title to entry - thank you)
Tuesday, 27 July 2010 09:21
American Banker
By Rob Nichols
Given current Congressional Budget Office projections, there is reason to conclude that, unless significant structural changes are made to balance revenues with spending, the U.S. will probably approach a point where global market sentiment regarding the nation's fiscal condition could change abruptly for the worse.
This would make corrective action far more urgent and painful than if such steps were taken in the near term.
Failure to meaningfully address the nation's fiscal circumstances raises the prospect of dangers that could hurt the U.S. economy. Principal among these is the risk that investors could demand higher risk premiums when buying U.S. government debt.
At the current elevated debt tally, rising interest rates could quickly compound an already challenging fiscal situation. Moreover, given that Treasury bills and bonds are the basis for borrowing structures in private credit markets, the effect of burgeoning government debt on the cost of capital, economic growth and job creation would be far-reaching and decidedly negative....
