Try this, images.mauldineconomics.com: PDF document

A good and thoughtful read, as usual.

I would quibble with this particular write-up only in degree: I think that all the things he talks about as risks and unsustainable trajectories are true, but I think they can go on for very much longer than he seems to.

For example, one of his key points is that interest costs are currently rising faster than the economy is growing, and that can't go on forever. Though entirely true, I am not sure it is necessarily timely or perhaps even salient. It could go on like that for ages, and even small changes to the underlying dynamic would change the outcome a great deal in a Micawber-like way. It's a real worry, like the steel barrier on the side of the highway, but you may not hit it even if you're steering towards it at the moment, and even if you did the point of contact might be a very long way down the road. Just ponder how many years, decades, it has been since the Japanese bond market blew through the milestones of "unsustainable", "imminent danger", and "implosion any day now".

It's not that I think the US debt trajectory is sustainable. The idea is just that any economy has thousands of things going on all the time that would cause catastrophe if they kept going on the same way indefinitely. But things change. It's very hard to pick the few that are the most imminent dangers, but this actually might not be one of them.

The main solution is actually pretty simple, since so many other countries have already done it. The US has 19th century taxation system poorly suited to the level of spending comparable to a modern Western European economy. The US needs a national value-added tax, the proven method of getting the most feathers from the goose with the least amount of hissing. And the smallest number of economic distortions. I guess that falls under the Juncker rule though: "We all know what to do, but we don’t know how to get re-elected once we have done it.".

Canada had federal deficits in the range of 8% of GDP in the mid 1980s (not even considering the provincial level deficits), and it was "obvious" that catastrophe was imminent because the path was unsustainable. But sure enough, it was a surplus within about a decade, thanks mainly to the introduction of (yup) a national value added tax (replacing the prior hidden and narrow manufacturer's tax). And yup, the Conservative government that introduced it and got the finances in order was tossed out because the tax was so reviled. Their opponents and replacements were elected largely on a platform of repealing it, and they created a study group to look at what could be done, or at least what lipstick could be added to the pig, which was quietly buried because repealing a really good policy ultimately wasn't found to be feasible. In the end, they just redesigned the form to make it look simpler for a company to file. (I was doing consulting work for Revenue Canada's goods and services tax department at the time and watched this unfold with amusement, though from well beyond the mud-splatter zone)

Jim