According to the author, several existing and forthcoming issues need to be resolved concerning the U.S. economy: defense spending, privatization versus federal/state-run enterprises, infrastructure improvements, immigration, and healthcare. Potential solutions are not provided, but the author implies that resolution will be necessary if the world is going to be willing to sustain the current level of U.S. debt.
What’s Inside?
A number of issues have arisen regarding the sustainability of the current level of U.S. debt as the United States has become a proportionately smaller percentage of the global gross domestic product. The tolerance of the world to the level of U.S. debt is partly affected by how it is spent and partly by the role of the United States internationally. If the United States is expected to help defend other countries, then debt attributable to defense spending may be tolerated. But it is not clear what the U.S. government intends to do with regard to defense spending.
Other issues of government investment include decisions about whether such services as education should be funded and operated by the federal government, the state government, or the private sector. Similarly, infrastructure improvements currently appear to be stagnant because of indecision and protected self-interests. Another looming fiscal issue is the unresolved funding of healthcare as the population ages and costs increase.
The author suggests that immigration may be a way to build assets and productivity in the United States but that the issue is stymied by emotion rather than economic reasoning. He closes with the thought that the United States has the capacity to thrive, but these unresolved issues threaten budget/debt sustainability and could lead to economic stagnation. Consequently, there is reason to be worried about the level of U.S. debt.
How Is This Research Useful to Practitioners?
The issues of defense spending, provision of services, infrastructure, healthcare, and immigration appear to be independent, but the author contends that all are related to the sustainability of U.S. debt because decisions or indecision on these issues will affect how tolerant the world will be about the level of U.S. debt. Practitioners may disagree on the resolution of these issues but probably can agree that a lack of decisive action is damaging to the United States’ ability to thrive. How these issues are resolved (or not) will affect investment decisions in the future.
Abstractor’s Viewpoint
I like how the author demonstrates the interrelatedness of these issues from the perspective of sustainable debt levels and further states that a temporary stimulus is not a cure but a delay in following a decisive path. I think solutions to these issues are debatable (and are not really debated in this article). But I tend to agree with the author that further indecision on these issues is certainly a cause for concern in considering a sustainable level for U.S. debt.