Writing in Sunday's Washington Post, Joel Achenbach is what the kids used to call "shrill" about the fiscal health of the United States.
The short term looks awful, and the long term looks hideous. Under any likely scenario, the federal debt will continue to balloon in the years to come. The Congressional Budget Office expects it to reach $20 trillion over the next decade—and that assumes no new recessions, no new wars and no new financial crises. In the doomsday scenario, foreign investors get spooked and demand higher interest rates to continue bankrolling American profligacy. As rates shoot up, the United States has to borrow more and more simply to pay the interest on its debt, and soon the economy is in a downward spiral.
Ouch. Murmurs from the Obama administration are not reassuring:
When I spoke to Peter Orszag, the director of the Office of Management and Budget, he expressed optimism that the administration can balance the primary budget—not including interest payments—by 2015. The longer-term deficits are his bigger worry. Asked if the political process in Washington is broken, he answered: "I think it's too soon to know whether the system's broken. The problem is not what happened last year or this year. The real issue is when we move forward in time, something has to give."
Most troubling of all is the way the article ends, with some quotes from one of the stars of Michael Lewis' terrific The Big Short, Michael Burry:
[Burry] believes the federal government is behaving like the companies that lost billions in mortgage-backed securities. He told me he sees the common mistake of focusing on short-term benefits—whether quarterly earnings or the next election.
The world doesn't want America to go broke, he points out. Americans are the planet's greatest consumers. But if this is a bubble, it will burst with little warning, Burry said.
"Strictly looking at the monthly Treasury statement of receipts and outlays," Burry said, "as an 'investor,' you see a company you might want to short."
God help us.