As the economic situation in Europe has deteriorated, the U.S. has been going down its own rocky path.... Taxes have to be raised and/or spending must be cut. The pain associated with these actions will fall on different groups, and that leads to political conﬂict. Political conﬂict means delay in getting the U.S. fiscal situation on firmer ground. Whether this conﬂict will scare financial markets and lead to a rollover crisis for the U.S. remains to be seen.....
So what is the moral of this modern debt tragedy?.... Borrowing, by its very nature, is seductive--the rewards are felt immediately and the pain is postponed to the future.
Thus, it is very tempting for government leaders, much like individuals and households, to push the envelope of borrowing to obtain current pleasure while downplaying the pain that will come. As a result, debt burdens can rise to levels that eventually become unsustainable, leading to crisis and periods of severe austerity. The world has moved into such an era now, and the final act of this modern tragedy is yet to come.
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