The Government Debt Bomb
As the world economy begins to recover, renewed attention is being paid to enormous fiscal deficits and vast expansion of government debt. Fiscal exit strategies must be planned and implemented soon, before stimulus programs become permanently entrenched, develop powerful constituencies, and greatly increase the risk of rising interest rates, inflation, and taxation.
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STANFORD – As economies around the world return to growth after the deepest recession in a generation, renewed attention is being paid to enormous fiscal deficits and vast expansions of government debt. This year’s projected deficits (as a share of GDP) are estimated to be a remarkable 13.5% for the United States, twice the previous record at the depth of the horrific early 1980’s recession. Among other major economies: the United Kingdom, 14.4%; France, 8.2%; India, 8.0%; Japan, 7.4%; Italy, 5.4%; Germany, 4.7%; China 4.2%; and Canada, 2.4%.