The unprecedented, improbable and indeed almost unimaginable global financial crisis has virtually put an end to the comfortable notion that American and Western capitalism would dominate the world economy. In turn, the financial meltdown threatening another Great Depression has been the rationale for a phenomenal expansion of government spending to prop up demand and fend off economic disaster.
As a result, the deficit quadrupled from $459 billion in 2008 to $1.85 trillion this year. It has gone from 3.2% of gross domestic product to 13.1%, twice the post-World War II record of 6% in 1983 under President Reagan. What's more, the debt surge is unlike the one that accompanied WWII in that it will not be temporary.
The nonpartisan Congressional Budget Office reckons that the deficit will run for a decade and will still exceed $1.2 trillion in 2019. By that time, the United States will have virtually doubled its national debt, to over $17 trillion. Then, after 2019, we get another turn of the screw as the peak waves of baby boomers move into their retirement years and costs soar for the major entitlements, Social Security and Medicare.
At 41% of GDP in 2008, the accumulated federal debt will rise to 82% by 2019. One out of every six dollars spent then by the feds will go to interest, compared with 1 in 12 dollars last year. These out-year budgets will require an increase in everyone's income taxes, raising federal income taxes an average of $11,000 for families, a hike of 55% per household - a political impossibility.
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