New analysis reinforces urgency of S&P outlook
WASHINGTON, April 21, 2011 /PRNewswire-USNewswire/ -- The PJ Institute (PJI) today released a special report on the U.S. debt, analyzing the window of time that America may have to fix the debt crisis before the country could no longer be able to borrow money. A new PJI analysis shows the window narrowing from 11 years to six in the last nine months, reemphasizing the urgency of our situation. This report is part of PJI's Maxed Out America project.
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"The United States must make immediate and permanent fiscal adjustments," said Laurence Kotlikoff, Boston University professor and consulting economist on PJI's economic initiatives. "We are running out of time. The window America has to reduce the deficit and national debt is collapsing. Nonetheless, Congress is failing to take the situation seriously, doing far too little during the latest government shutdown showdown."
In 2007, the U.S. had 21 years to reduce its spending before its debt consumed 90 percent of its GDP. Some experts consider that debt-to-GDP ratio as the trigger point for economic decline, including the point at which nations can't find lenders willing to finance their spending. As recently as June 2010, that time interval shrunk to 11 years, or by 2021. Now, we estimate that it has shriveled to only six years to 2017 based on a new PJI analysis that factors in the President's original 2012 budget, which was submitted in January of this year.
"It is time to stop the political infighting and move toward a meaningful solution," Kotlikoff continued. "Uncle Sam cannot afford to panic its creditors, which could happen in six years or tomorrow morning. Once panic sets in, it's game over, as we're seeing with Portugal, Greece, and Ireland."
PJI's special report was reinforced with news from Standard and Poor's earlier this week, which warned that the U.S.'s credit rating could be downgraded if a plan is not developed to reduce the deficit and national debt by 2013. This came behind Pimco's announcement that the investment company will stop backing U.S. Treasury bonds. Headlines from across the country reflect the dire straits we now find ourselves in:
- The Guardian: "Worst since Pearl Harbor: Debt blow for U.S. economy"
- Financial Times: "S&P sounds alarm on U.S. debt"
- New York Times: "Wall St. Sends Warning to U.S. on Debt Levels – Markets fall sharply"
- Washington Post: "S&P lowers its U.S. debt outlook – Top credit rating could be lost"
- Wall Street Journal: "U.S. Warned on Debt Load: S&P Signals Top Credit Rating Is In Danger, Stoking Political Battle on Deficit"
- LA Times: "Warning Raises Stakes in U.S. Debt Debate: Standard & Poor's says it could lower nation's credit rating in the next two years, jolting financial markets"
PJ Institute
The PJ Institute™ (PJI), the research and educational division of Pajamas Media™, provides in-depth analysis on a variety of topics – from the economy and personal finance to history and its impact on the present. Additionally, PJI offers its research and education through an array of new media and social media technologies.
PJI has two economic initiatives – Maxed Out America and the National Economic Rescue Initiative. More specifically, the Maxed Out America initiative explores both the amount of time until, and the date when, the U.S. could buckle under its debt burden. We identify the Fiscal Solution Window as the interval of time the U.S. has to reverse it ever-growing deficit spending and mounting debt.
For more information, please visit www.pjinstitute.com.
Contact:
Danielle Howe
(703) 535-3390
SOURCE PJ Institute
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