MONTREAL, Oct. 7, 2013 /CNW Telbec/ - Already partially paralyzed by the
lack of agreement over budgetary spending, the United States must in
the coming days increase the legal debt ceiling for an 13th time since 2002. These two chronic problems are due to the explosion of
mandatory spending related to social programs that cannot be offset in
the long run by tax increases, according to the Viewpoint on US Government Finances published today by the MEI.
This publication notes that successive budget deficits, even in good
times, have had the effect of causing the American debt to increase
substantially, from 49.3% to 72.6% of GDP over the past twenty years.
For Germain Belzile, economist and coauthor of the Viewpoint, increasing taxes to balance its finances is just a way for the
government to refuse to come to terms with the problem. For example,
creating a 5% sales tax, like the GST in Canada, would only cover
supplementary spending for a dozen years. This tax would need to be
continually raised, up to 15% by 2035. And even this draconian and
politically unthinkable option does not offer a sustainable solution to
the problem, continues Mr. Belzile.
The projections of the Congressional Budget Office show that the current
situation is not an exceptional one due to the economic crisis, but
instead is the result of a structural problem.
"These past 20 years, mandatory spending has risen nearly twice as fast
as US GDP, which is an unsustainable rate. In their current forms,
Medicare, Medicaid and Social Security will make balancing the budget
more and more difficult in the future. The unsustainable increases in
government spending must therefore be tackled by undertaking a deep
reform of American social programs," says Jean-François Minardi,
economist at the MEI.
The Viewpoint on US Government Finances was prepared by Germain Belzile and Jean-François Minardi,,
respectively senior fellow and public policy analyst at the Montreal
Economic Institute. This publication is available at www.iedm.org.
The Montreal Economic Institute is an independent, non-partisan,
not-for-profit research and educational organization. Through its
publications and conferences, the MEI stimulates debate on public
policies in Quebec and across Canada by proposing wealth-creating
reforms based on market mechanisms.
SOURCE: MONTREAL ECONOMIC INSTITUTE
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