Between tax cuts, the war in Iraq and surging costs for Medicare and Medicaid, the deficit this year will likely top $400 billion, a record in dollar terms though not as a percentage of gross domestic product. It could be bigger if the price tag of stabilizing Iraq goes up even more.
At least they mentioned that it is not a record in percetage terms. Nor do they mention that both Japan and Europe (on average) face far higher unfunded social liabilities, as well as higher national debt relative to GDP. Japan's national debt is currently 140% of annual GDP, and I don't believe counts unfunded liabilities that will likely arise from private pension fund insolvence. The US public debt is about 40% of GDP.
It should shrink in the next few years as a recovering economy boosts tax revenue, but then start to grow again as retired baby boomers stop contributing to Social Security and Medicare and start to draw on them.
The US population increases by about 3 million people per year, primarily via immigration (legal and illegal). Within 60 years, that will equate to a near doubling of the US population. Heck, there are many groups who are concerned about excessive POPULATION GROWTH, not reduction.
balance.org
diversityalliance.org
And all of these people will pay taxes to some degree, and their children will hopefully pay higher taxes based upon higher salaries.
These are a few factors that the WSJ writer seemed to omit..
But does that mean there's not some reason for concern? Absolutely not.. But we MUST ALWAYS take into account the US position relative to our major economic competition with regard to how such demographic trends impact our economy.
As for inflation, like alcohol, drinking a little is alright since it indicates pricing power for corporations. Too much and, like a drunk driver, we're eventually heading for big trouble and a potential economic "cold shower" ala Fed Policy under Paul Volker during the '80s.
Hawk |
