Yes, there is talk about how the large debt is having an impact on policymaking in America.The U.S. debt currently stands at US$ 11.5 trillion. No joke
Why is this bad?
1. Future spending programs would be curtailed-The U.S. govt will be very handicapped in passing future spending programs through the senate. The amount of spending (over US$1 trillion) announced in the last 10 months or so have not showed results (mainly because very small percentage of it has been actually been spent till now). Obviously, it takes time for money to enter the system through this channel. However, the impatience of people could mean more pressure on govt to spend. But, the problem will be to convince the senators to support more packages. Several of them are already crying foul.
2. No more bail-outs- If the economy dips again, the govt may not be in a position to bail out anyone. This is good for free market economists but not necessarily for the politicians.
3. Credit rating of USA will become low
4. The pressure on interest rates will not ease quickly
Add to that the fear of a falling U.S. dollar. Everyone is aware of the potential of China and Japan to trigger about a dollar crisis by mass selling of treasury bonds.
This is a real crisis. Govt needs to do much more to tackle it. However, I still support most of the spending programs that had been initiated to tackle the on-going crisis.
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