[Texgreen] The coming crash

[Roger Baker]

... Under any reasonable set of expectations about future spending  
and revenues, the risks posed to the Nation's future financial  
condition are too high to be acceptable. By definition, what is  
unsustainable will not be sustained. The question is how our current  
imprudent and unsustainable path will end...

But let us understand that there are non-crash scenarios. For example  
it could be that American voters could decide to give up most of  
their social security benefits as a foolish self-centered luxury. Or  
perhaps the upper 1% who own a third of all the wealth could decide  
to abdicate peacefully by surrendering about 90% of what they now  
have, leaving them mere millionaires. -- Roger

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<http://www.gao.gov/docsearch/abstract.php?rptno=GAO-06-1077R>

Abstract

The Nation's Long-Term Fiscal Outlook: September 2006 Update,  
GAO-06-1077R, September 15, 2006

PDF

Since 1992, GAO has published long-term fiscal simulations of what  
might happen to federal deficits and debt levels under varying policy  
assumptions. GAO developed its long-term model in response to a  
bipartisan request from Members of Congress who were concerned about  
the long-term effects of fiscal policy. In 1992 GAO said: "The  
federal budget is structurally unbalanced. This will do increasing  
damage to the economy and is unsustainable in the long term.  
Regardless of the approach chosen, prompt and meaningful action is  
essential. The longer it is delayed, the more painful it will be."  
These words are as relevant today as when GAO first published them.  
GAO updates its simulations three times a year as new estimates  
become available from the Congressional Budget Office's (CBO) Budget  
and Economic Outlook (January), Social Security and Medicare Trustees  
Reports (early spring), and CBO's Budget and Economic Outlook: An  
Update (late summer).

The long-term outlook has not changed significantly since the last  
simulations. Although this year's deficit outlook has improved, the  
long-term continues to be unsustainable. GAO's current long-term  
simulations continue to show ever-larger deficits resulting in a  
federal debt burden that ultimately spirals out of control. The  
timing of deficits and the resulting debt build up varies depending  
on the assumptions used, but under either optimistic ("Baseline  
extended") or more realistic assumptions, current fiscal policy is  
unsustainable. Simulations are not forecasts or predictions. They are  
designed to ask the question "what if?" GAO's "what ifs" are that  
discretionary spending may grow faster or slower, and tax cuts may be  
renewed or allowed to expire--but in both cases, the Nation's long- 
term fiscal future is "at risk." Under any reasonable set of  
expectations about future spending and revenues, the risks posed to  
the Nation's future financial condition are too high to be  
acceptable. By definition, what is unsustainable will not be  
sustained. The question is how our current imprudent and  
unsustainable path will end. At some point, action will be taken to  
change the Nation's fiscal course. The sooner appropriate actions are  
taken, the sooner the miracle of compounding will begin to work for  
the federal budget rather than against it. Conversely, the longer  
action to deal with the Nation's long-term fiscal outlook is delayed,  
the greater the risk that the eventual changes will be disruptive and  
destabilizing. Acting sooner rather than later will give us more time  
to phase in gradual changes, while providing more time for those  
likely to be most affected to make compensatory changes.