I'M AFRAID TO TELL YOU THERE'S NO MONEY LEFT
May 20, 2010
Americans don't realize just how bad Britain's situation is. True, Britain's not on the euro, which is a huge help. But Britain's got a larger structural deficit -- in other words, the deficit after you factor out the effects of the recession -- than Greece, and its borrowing one pound for every four it spends. It will take years for Britain to recover from the pain New Labor has inflicted, says Ted R. Bromund, the Margaret Thatcher Senior Research Fellow at the Heritage Foundation.
If only we were so lucky, says Bromund. As Edmund Conway pointed out last week, the situation in the United States, according to the International Monetary Fund, is if anything even worse than Britain's:
- While Britain's debt has grown rapidly since 2000, the growth at least looks likely to stall by 2015, if the new British government carries through on its pledge to cut spending.
- On the other hand, there's the United States, where debt is increasing far faster than almost any other country.
- And because the average maturity on U.S. debt is relatively short, the United States will need to sell a lot of debt very quickly, which means it is even more vulnerable if the market suddenly decides to demand higher interest rates.
- As the IMF puts it, the United States needs to reduce its structural deficit by the equivalent of 12 percent of gross domestic product (GDP), a much larger portion than any other country analyzed except Japan.
And it gets better, says Bromund:
- These numbers don't reflect the effects of ObamaCare, or any more emergency spending ("stimulative" or otherwise).
- Nor do they reflect the fact that, if taxes are held at their historic levels, entitlement spending will by 2052 consume the entire federal budget, leaving nothing for national defense or even interest on our debt mountain.
Source: Theodore Bromund, ""I'm Afraid To Tell You There's No Money Left," Heritage Foundation, May 19, 2010.
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