Sunday, November 7, 2010

Weekend Reading

   With President Obama opening up to the idea of extending all the Bush tax cuts, that outcome seems ever more likely. Investors will certainly rejoice with this news as it should offer clarity and hopefully a boost to the economy. However, an unpleasant side effect of this decision would occur within the OMB and CBO's economic outlooks. Currently, the two reports have been using a baseline assumption that all the Bush tax cuts would expire at the end of 2010. Based on recent projections, maintaining the tax cuts would likely add several trillion dollars to the budget over the coming decade. If the tax cuts are extended prior to the next releases, the budget deficit and debt projections will surely take a significant hit and may appear far more drastic. A couple recent articles offering detailed and perceptive views on the U.S. debt outlook are certainly worth reading...

  • A Hidden Fiscal Crisis by Laurence J. Kotlikoff argues that current measures widely understate the fiscal problems that are present in data on the fiscal gap.
  • Managing the Federal Debt by Jason Thomas details Treasury market proceedings and the potential issues with relying on short-term financing.

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