The Balance Sheet Worsens

See how good you’ve become at reading the writing on the wall. I offer two excerpts today.

The first is from last week’s report from Moody’s, the one that noted “substantial execution risk” as triple-A-rated economies try balancing stimulus spending with balance sheet rebalancing:

Growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion. . . . We are not talking about revolution, but the severity of the crisis will force governments to make painful choices that expose weaknesses in society.

The second is from yesterday’s Wall Street Journal, regarding the health care reform bill:

Caterpillar Inc. announced that ObamaCare will increase its health-care costs by $100 million in the first year alone, due to a stray provision about the tax treatment of retiree benefits. This will not be the only such unhappy surprise.

While the subsidies don’t start until 2014, many of the new taxes and insurance mandates will take effect within six months. The first result will be turmoil in the insurance industry, as small insurers in particular find it impossible to make money under the new rules. A wave of consolidation is likely, and so are higher premiums as insurers absorb the cost of new benefits and the mandate to take all comers. . . . When prices rise and quality and choice suffer, the fault will lie with ObamaCare.

Then there are the self-styled “deficit hawks” like Jim Cooper of Tennessee. These alleged scourges of government debt faced the most important fiscal vote of their careers and chose to endorse a new multitrillion-dollar entitlement. They did so knowing that the White House has already promised to restore some $250 billion in reimbursement cuts for doctors that were included in yesterday’s bill to make the deficit numbers look good. Watch for these Democrats to pivot immediately and again demand “tough choices” on spending — and especially tax increases — but this vote has squandered whatever credibility they had left.

It looks like the US is still on track to reach its fiscal goal of being $20 trillion in hock by 2020. That’ll make for a nice campaign bumper sticker.

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