Posted by David Walker
The United States faces a financial crisis, with soaring debt levels and trillions of dollars in unfunded health and social security obligations. Radical reform is required to avert disaster argues the country’s former Comptroller General.
America was once the world’s leading creditor nation: now it is the world’s largest debtor nation. Today, the greatest threat to the US government’s future is its own fiscal irresponsibility. In this regard, while Osama bin Laden has been held accountable for his actions, it’s now time for policy-makers to put the government’s finances in order before the markets hold the country accountable for its inaction.
In March 2011, the Comeback America Initiative (CAI) and Stanford University released a Sovereign Fiscal Responsibility Index (attached below) based on each country’s fiscal space, path, and governance. Fiscal space was defined as the amount of additional debt a country could theoretically issue before a fiscal crisis is imminent; the fiscal path is an estimate of the number of years before it will hit maximum debt capacity; and fiscal governance is an indicator of the strength of a government’s institutions, its fiscal controls, and its transparency and accountability to its citizens.
The US ranks far below the average in all three of these categories and it is 28th out of 34 countries in the area of fiscal responsibility and sustainability – below Spain and Italy and only a few notches above Greece, Ireland, and Portugal. The report suggests that the US could face a debt crisis just two to three years from now.