new steps to make the yuan more readily available in global markets, one more steptoward being able to compete with, or displace, the dollar as a global reserve currency.Some here may recall that just a ew weeks earlier, the International Monetary Fund hadquestioned America’s “credibility” on our national debt. This week, the IMF issued areport suggesting that China’s economy could surpass America’s as early as 2016, inpurchasing power terms, not per capita. These are the kinds o signals that make it eelas though history is on ast orward, and it’s not moving in our avor.Americans are worried, and rightly so. Recent polls show confdence in our uture at anall-time low. For the frst time ever, a majority o Americans expect that their children’sutures won’t be as good as theirs. Clearly, the ater-shocks rom the Great Recession,especially stubbornly high unemployment, play into that. But so does concern aboutUncle Sam’s historic, post-crisis defcits.
Our defcits are among the world’s largest
2010 budget deﬁcit as a percentage of GDP in some AAA-rated countries
Note: IMF calculations or the U.S. dier rom Congressional Budget Oce fgures, which put the U.S. defcit at8.9% GDP.Source: International Monetary Fund.
Federal defcits now claim a ar larger share o our economy than comparably ratedtriple-A sovereigns, like the United Kingdom, France, Canada, Australia, and Germany.When the world’s largest economy also runs the developed world’s largest defcits,worry is well grounded, not hysterical. That may be one reason why the largest bondhouse in America, PIMCO, announced some time back that they were getting out o U.S.Treasury bonds.Our political leaders show no sign o being willing to collaborate, or compromise, onways to deal with this — at least not yet. Instead o serious bargaining and action to curblong-term debt, this year in Washington promises little more than political positioning,head butting, and games o chicken. Concern or America’s credibility and solvencyseems to be taking a back seat to the politics o the 2012 presidential election.
Federal decits now claima ar larger share o our economy than comparably rated triple-A sovereigns,like the United Kingdom,France, Canada, Australia,and Germany. When theworld’s largest economy also runs the developed world’s largest decits,worry is well grounded, not hysterical.We have to nd a way orward to renewed national solvency. We have to make a tough, sometimes painul, transition away rom old patterns o debt, leverage, and debt-ueled consumption toward a new economic model centered on higher saving, investment, new business ormation, and jobcreation. Our goal should be to reboot a solvent America that cancompete, win, and grow in tough global markets.