Guessing the Trigger Point for a U.S. Debt Crisis

George Mason University Mercatus Center Working Paper No. 10-45

10 Pages Posted: 15 Sep 2010

Date Written: August 24, 2010

Abstract

Leading authorities in the United States, including the Congressional Budget Office, use the term unsustainable to describe the long-term fiscal outlook. By the year 2080, spending on entitlements alone could exceed total federal tax revenues. In the very long run (meaning from the year 2035 through 2080), the problem is primarily one of excess costs in health care, meaning the tendency for health spending to grow faster than the rest of GDP. However, in the medium run, meaning from 2010 through 2035, the aging of the U.S. population is the dominant factor.

This paper explores the possibility of the U.S. experiencing a debt crisis in the medium run, meaning somewhere between 2015 and 2035. It is impossible to state precisely the trigger point for a crisis. At best, we can make guesses about some of the key parameters

Keywords: Debt, Debt Crisis, Default, Entitlements, Spending

JEL Classification: H5, H6

Suggested Citation

Kling, Arnold, Guessing the Trigger Point for a U.S. Debt Crisis (August 24, 2010). George Mason University Mercatus Center Working Paper No. 10-45, Available at SSRN: https://ssrn.com/abstract=1676845 or http://dx.doi.org/10.2139/ssrn.1676845

Arnold Kling (Contact Author)

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

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