The Looming U.S. Fiscal Crisis and Its Implications
At a moment when political arguments and economic tailwinds fill the headlines, the threat of an American fiscal crisis is becoming a pressing concern for policymakers and investors both. In recent years, the United States has watched its federal debt surge to record highs as a percentage of its gross domestic product, fueling fears that the country is hurtling toward a fiscal cliff. This column explores the intricate dynamics of U.S. fiscal policy, the rising debt burden, and the chain reaction of market and societal consequences that might result if bold, structural reforms are not put in place. For many decades now, the U.S. has been relying on fiscal stimulus and large social programs to stimulate economic growth and social welfare. But these policies have come at a very high cost. Recent studies point to the fact that the U.S. federal debt now stands at almost 100% of its GDP—a figure that most economists have deemed unsustainable. In the years ahead, estimates point to the debt r...