None Dare Call It Boomergeddon

Joseph E. Gagnon and Marc Hinterschweiger have gone where no man has gone before. Well, maybe not no man, but very few… I went there in my book “Boomergeddon,” but I’m not a trained economist so in the parlors of power I don’t count.

In a new book, “The Global Outlook for Government Debt over the Next 25 Years,” Gagnon and Hinterschweiger do three things: (1) project the global debt outlook to 2035, (2) ask whether the combination of debts and deficits among a large number of countries at the same time produces a different impact from the traditional crisis affecting only a handful of countries, and (3) analyze the impact on global interest rates and growth rates.

The analysis concludes that the public debt profiles in most advanced economies will grow to dangerous and unsustainable levels over the next couple of decades unless major changes are made in projected spending and revenue levels. The United States and Japan, in particular, need to start planning now for significant future budget cuts to minimize the risk of a crisis. Acting soon will enable the adjustment to be phased in over an extended period, which will cushion the inevitable adjustment costs.

If government debt continues to follow current trend lines, interest rates eventually will rise, “crowding out productive investments and slowing down the rate of economic growth,” the authors write. High levels of debt will make it impossible for governments to respond forcefully to future economic downturns.

In other words, the duo sees Boomergeddon on the horizon. But they’re economists, and they write like economists, so they don’t have a memorable name to call it. But the message is the same.

“Although we have time to act,” write Gagnon and Hinterschweiger, “time is not on our side.” They argue that spending cuts and tax increases should not be implemented in the next two years so as to avoid derailing the economic recovery. But policy makers need to begin planning now to make major adjustments very soon thereafter. “In the most advanced economies and some developing economies,” they conclude, “failure to act probably will result in a fiscal crisis of some form in the next 25 years.”

Here in Virginia, we can hope that Congress will get its act together and do the responsible thing. Yeah, right. And we can hope that fairies will sprinkle pixie dust on us so we have physiques like Brad Pitt’s. Alternatively, we can trust in ourselves by fiscally fortifying the Old Dominion to survive Boomergeddon.

Let’s weigh the options: Trust Congress to do the right thing… Trust Congress to follow the path of least resistance and put off the hard choices. You decide.

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