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Commentary: Over the "cliff," the real devil is "fiscal abyss"

English.news.cn   2013-01-01 11:38:28            

by Ming Jinwei

BEIJING, Jan. 1 (Xinhua) -- After coming too dangerously close to the "fiscal cliff," U.S. politicians have reportedly reached a deal to avoid sharp tax increases and deep spending cuts.

Little is known about the deal so far. It is also far from clear whether any formal piece of legislation on the issue can survive the highly polarized U.S. congress.

Many have long warned of the potential danger of falling off the "fiscal cliff." However, for some keen observers, the United States, with a total government debt of nearly 16.4 trillion U.S. dollars, has a bigger devil to fight with than the "fiscal cliff" as far as its long-term fiscal sustainability is concerned.

The U.S. government debt, more than 100 percent of its Gross Domestic Product (GDP), makes the nasty sovereign debt crisis that has toppled many European governments and led to ugly street demonstrations in Greece look like a mere hiccup.

As the world's sole superpower, the United States is clearly not Greece. The greenback is still the dominating currency in the global monetary system. Washington can still borrow at low costs even when some smaller European economies are completely shut out of the global bond market.

But economics and common sense do not lie. People, or governments, can overspend for some time, but they simply cannot live on borrowed prosperity forever.

For the Americans, their government has been in the red for too long. Since 2002, Uncle Sam has not tasted any government surplus in over a decade as it borrows heavily to support costly wars in the Middle East and to stimulate the economy out of a recession in the wake of the global financial crisis.

The U.S. government has also issued hundreds of billions of IOUs to cover the ever expanding costs of the bloated entitlement programs.

With the United States temporarily over the "fiscal cliff," both the country and the world are now presented with a unique opportunity to debate the much-delayed issue of the long-term U.S. fiscal sustainability.

When U.S. Federal Reserve Chairman Ben Bernanke coined the term "fiscal cliff," he should also be aware of the 16.4-trillion hole in U.S. public finances.

If you call over 600 billion dollars of tax increases and spending cuts a "fiscal cliff," the total U.S. government debt has created nothing but a "fiscal abyss."

The most worrying thing about U.S. politicians is that if they have come so close to falling off a "cliff," they are far less likely to reach a deal to help their country climb out of an abyss.

In a democracy like the United States, tax increases and spending cuts, the exact dose of medicine needed to cure its chronic debt disease, have long proved hugely unpopular among voters. So the politicians have chosen to kick the can down the road again and again.

But as we all know, the can will never disappear. Sometime and somewhere, you might trip over it and fall hard on the ground, or in the U.S. case, into an abyss you can never come out of.

Editor: An
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