Barron’s takes the view that our ever increasing federal debt level is unsustainable and that drastic measures are needed. They favor huge spending cuts and sequestration. But that almost certainly would tank an already wobbly economy. So, eventually, they will monetize the debt by printing more money and letting inflation help them pay for it. However that could be a disastrous as sequestration. There are no easy answers here.
In his State of the Union speech last Tuesday, President Obama concluded that “the State of our Union is stronger.” The big question is: stronger than what?
Federal debt is a record $12.2 trillion, or 76% of the nation’s annual output of goods and services. While that’s still well below Greece’s 153%, we’re headed steadily in the wrong direction.
According to estimates by the Congressional Budget Office, adjusted by Barron’s to account for recent tax increases and other factors, if the U.S. doesn’t raise taxes further and cut spending dramatically, the national debt could easily reach 153% of economic output by 2035.