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If you thought last week’s job numbers were bad, take a look at the latest from Morgan Stanley’s chief economist, Richard Berner.
In a research note that’s been making the rounds of economics blogs this week, Berner declares that “America’s long-awaited fiscal train wreck is now under way.”
By “train wreck,” he means out-of-control federal budget deficits that he’s sure will finally drag the economy under — as if we weren’t already feeling badly enough about its shaky state.
“Depending on policy actions taken now and over the next few years, federal deficits will likely average as much as 6 percent of [the gross domestic product] through 2019, contributing to a jump in debt held by the public to as high as 82 percent of GDP by then — a doubling over the next decade,” Berner writes on Morgan Stanley’s online Global Economic Forum.
“Worse, barring aggressive policy actions, deficits and debt will rise even more sharply thereafter as entitlement spending accelerates relative to GDP. Keeping entitlement promises would require unsustainable borrowing, taxes or both, severely testing the credibility of our policies and hurting our long-term ability to finance investment and sustain growth,” he adds. “And soaring debt will force up real interest rates, reducing capital and productivity and boosting debt service.”
“Not only will those factors steadily lower our standard of living,” Berner concludes, “but they will imperil economic and financial stability.”
In a research note that’s been making the rounds of economics blogs this week, Berner declares that “America’s long-awaited fiscal train wreck is now under way.”
By “train wreck,” he means out-of-control federal budget deficits that he’s sure will finally drag the economy under — as if we weren’t already feeling badly enough about its shaky state.
“Depending on policy actions taken now and over the next few years, federal deficits will likely average as much as 6 percent of [the gross domestic product] through 2019, contributing to a jump in debt held by the public to as high as 82 percent of GDP by then — a doubling over the next decade,” Berner writes on Morgan Stanley’s online Global Economic Forum.
“Worse, barring aggressive policy actions, deficits and debt will rise even more sharply thereafter as entitlement spending accelerates relative to GDP. Keeping entitlement promises would require unsustainable borrowing, taxes or both, severely testing the credibility of our policies and hurting our long-term ability to finance investment and sustain growth,” he adds. “And soaring debt will force up real interest rates, reducing capital and productivity and boosting debt service.”
“Not only will those factors steadily lower our standard of living,” Berner concludes, “but they will imperil economic and financial stability.”
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