John Mauldin on the current Economy–Tough Choices, Big Opportunities

We’re just stuck?

If we don’t deal with it ”“ if we don’t proactively say we’re going to get our deficit under control ”“let me put it this way: My personal belief is that if we do proactively get our long-term budget issues under control, the bond market will say, “Okay, you’re credible and we will buy your bonds, because you have put yourself on a credible path ”“ whether it’s through cuts, whether it’s through tax increases, however you want to do it ”“ but you have to do it. But you have shown us a credible way to get to the place where the growth rate of your deficit is below the growth rate of nominal GDP.”

But if we don’t do that, my wine bottle of pain becomes a jeroboam and we end up downing it all at once.

That sounds ugly.

It is. It will force budget cuts; it will force tax increases of the magnitude that no one is ready to contemplate. We’re talking cuts in Medicare, cuts in education, in defense, in spending of all kinds. That would create a depression, a true depression that would last 4-5 years, push unemployment to 20%-25%….

Read it all.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, America/U.S.A., Asia, Budget, Consumer/consumer spending, Credit Markets, Currency Markets, Economy, Europe, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Medicare, Personal Finance, Social Security, Stock Market, Taxes, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The National Deficit, The U.S. Government, The United States Currency (Dollar etc)