A Nation in the Red: The Government Debt Crisis and What We Can Do About It

CHAPTER 8

CAN THE U.S. GOVERNMENT ESCAPE THE DEBT TRAP?

We all know what to do, we just don’t know how to get re-elected after we have done it.

—Jean-Claude Juncker, Prime Minister of Luxembourg and President of the Euro Group

Will the government go bust? This is the question that everyone would like answered. In Chapter 7 we reviewed the ways that countries deal with the Debt Trap. I think the United States already is in that trap, and so in dealing with it the country has five options. America is in very bad financial shape, maybe the worst it has ever experienced. Even after World War II, when the U.S. debt-to-GDP ratio was about 120 percent, the government was able to reduce its deficit to essentially zero without a massive depression, but ...