Budget Balance % GDP: UK next to crumble, US not far behind

Tim Geitner has recently said that the US will never lose its AAA status. Within a week ratings agencies gave him a rebuke.  It could happen. If the US does not control spending, it will happen.  Our last post, we looked at Debt to GDP, which is based upon previous consumption.  This post we look at Budget Shortfall % GDP, which looks at current consumption (See http://bit.ly/a5qLhh). 

The UK, at -14.0% of GDP, is certainly the worst in the OECD and one of the worst in the world.  The US is close behind at -10.5%.  Interestingly enough, some of the most responsible countries of the world are coming from the developing world.  Chile has a budget balance of -.5%, which is one of the lowest in the world.  The crown goes to Norway which boasts a huge surplus at over 10%.  Right now they are thanking their lucky stars that they didn't join the EU.  Let Germany bail out Greece.

What that means that if the UK continues to spend like they currently are spending, they will eventually run out of money.  The UK has already been warned by ratings agencies that they are on credit watch for downgrade to their sovereign debt.  The US cannot be far behind (See http://bit.ly/aKWGiw)
The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.

Under the ratings company’s so-called baseline scenario, the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody’s said today in a report.

“We expect the situation to further deteriorate in terms of the key ratings metrics before they start stabilizing,” Cailleteau said. “This story is not going to stop at the end of the year. There is inertia in the deterioration of credit metrics.”
The only way to solve this travesty is regime change.  We must take back congress from the spendthrift Democrats.  Gridlock is good. Most people, except Krugman, intuitively know that we can't spend our way into prosperity. Instead of fiscal stimulus, we should have fiscal restraint.


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