June 25, 2010
Blame the president. Blame politicians. Blame lazy Greeks. Blame the ongoing bailouts of Citigroup (NYSE: C ) and AIG (NYSE: AIG ) . There's a lot of blame going around on who's guilty for the world's ugly fiscal situation.
Here's what the International Monetary Fund has to say about it. This chart shows exactly why the public debt-to-GDP ratio of the world's largest countries will increase by an estimated 39 percentage points over the next several years:
(Click here for a U.S.-specific chart).
If you have a burning desire to fix the short-term budget mess, the most meaningful solution is to dramatically raise taxes. Everything else is peanuts. After that, you can tell the chronically unemployed to go pound sand and, in America's case, revoke the $300 billion in stimulus tax cuts. These three would do the trick more than anything else. (Long-term, it's a different issue.)
Of course, few want to venture down those roads. Balancing short-term deficits is predominantly a factor of increasing revenue, which short of an explosion in real growth won't happen without massive tax increases. No politician with the need to be re-elected would ever dare try this, and few level-headed economists would ever suggest it, either. Hence the red ink.
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