The U.S. Is Short on Options to Confront Next Crisis [View all]

[marmar]

(Bloomberg) Stock market and commodity price declines are sweeping the globe, raising a question: If the U.S. economy lands in another hole, what tools does it have to dig itself out?

Perhaps not many, or at least not as many as before the 2008 meltdown.

U.S. debt stands at 74 percent of gross domestic product, compared with 35 percent in 2007, based on a Congressional Budget Office report released Tuesday. That burden is expected to grow further in coming years, limiting government options for additional fiscal stimulus in the form of spending or lower taxes.



While the U.S. could follow in the footsteps of Japan, Ireland, Italy or Greece, which have racked up even higher debt-to-GDP levels, heftier deficits would be a hard political sell. After all, Congress has been loathe to borrow, curbing spending through "sequester" limits and pushing the nation to the brink of default in 2011 amid disputes over a debt-limit extension.

In recent years, the Federal Reserve has provided the stimulus that austerity-minded fiscal policy makers didn't. The central bank has held interest rates near zero since 2008 and carried out three massive asset purchase programs to boost the economy. .......................(more)

http://www.bloomberg.com/news/articles/2015-08-26/the-u-s-is-short-on-options-to-confront-next-crisis