The long-term problem is the massive debt burden.
The an unmanageable debt burden will reduce future wealth and reduce future freedom of action for the USA.
This burden is still growing.
The debt burden comes in several buckets such as (but not restricted to):
– Existing Accumulated Federal Debt (This is the current debt obligation of the United States).
– The NPV of reasonably expected future additional Federal debt (increased government size, cost and other spending)
– The NPV of future promised social security obligations (not well know, often distorted) and other pension obligations
– The NPV of future promised health obligations
– The NPV of expected military/sysadmin/security operations
There are seven generic strategies for dealing with the massive debt that I can think of off-hand:
– The Ostrich Strategy. Do nothing. Let future generations fix it or go under
– The Dove Strategy. Dramatically cut all military/sysadmin/security operations
– The Stingy Strategy. Reduce future payments by reducing payment amount to individuals
– The Picky Strategy. Reduce future payments by restricting and/or reducing individual eligibility
– The Growth Strategy. Increased Economic Growth Rate (so the debt burden becomes manageable)
– The Firesale Strategy. Sell/auction off Federal assets to pare down the debt
– The Engineer Strategy. (I need a better name for this, suggestions?) Restructure the Systems so they are more efficient and cost less.
– Printing Press Strategy…inflate the money supply which reduces the real debt (and reduces the value of current accumulated savings).
Public policy choices will included different combinations and weights to the application of the above strategies.
I will cover these in turn real soon now.