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By Glenn Hubbard
Published: May 26 2011 13:13 | Last updated: May 26 2011 13:13
On May 15, the US hit its "debt ceiling" of $14,300bn, covering publicly owned debt held by the Federal Reserve and government trust funds, and Washington is in a furore. While budget debates are often more talk than action, this one needs more talk "“ but of a different kind. That the US has an unsustainable fiscal trajectory is clear, but the problem is not the debt ceiling per se. My wife and I don't vote on whether we will pay our bills. Rather, we discuss whether our spending or income needs adjustment. So too must it be for our national "family".
The US has addressed debt burdens before. Between the end of the second world war and 1960, the nation cut its debt-to-gross domestic product ratio in half from 109 per cent to 46 per cent through economic growth and avoiding additional debt accumulation. The US debt problem is now more difficult.
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