America will soon be bankrupt as it is approaching $14.228 trillion
that is equivalent to 100% of GDP and the number is continuously rising. If the debt limit is not raised then it might default on its payment. The country has to take steps to control America’s debt proportion otherwise it might surely further complicate the situation.
IMF predicts that the US public debt will incessantly rise in five ye
ars from now. It is believed that the country’s economy will grow if the proposal for deficit reduction is taken into account. After five years the deficit will reach 112 per cent of GDP. The annual interest bill is expected to rise to $1trillion by the end of the decade.
America is on the verge of financial collapse and the broken political system is not capable to tackle the crisis. Paul Ryan chairman of the budgeting committee considers Obama’s plan to cut $4 trillion from the deficit over 12 years as hopeless attempt to tackle the financial crisis. Mr. Chairman proposed to lower the state spending in areas like defense, health care and welfare programs but it has been dismissed by his own party members. David Stockman, Ronald Reagan’s former budget director criticized the plan by saying “there is nothing serious or courageous about this plan.” In the US, the federal government is not taking serious steps to deal with this grave issue.
The US economy is expected to grow in order to reduce the borrowing but the country is also increasing the underlying fiscal deficit this year. According to the report of the Congressional Budget Office, the spending on the social security and the Government aided health care programs will increase by 10% approximately of GDP now and 20 years from now it will rise by 15%. If revenues do not increase then the spending on social security and healthcare will lead to a huge growth in the budget deficits and rise in federal debt.
America is struggling to come out from the financial crisis but due to lack of proper approach towards the situation it can’t dig itself out of the trap. But the US faced a similar fiscal crisis in the past and managed to regain control over the situation. Therefore, the chances are high that America can do it again.
According to the calculation of the IMF, in the next 10 years there should be deduction in spending and rise in tax level to bring back the debt level on the right track. Therefore, America can survive a financial catastrophe and a proper financial planning can lead the country back from the brink.