U.S. Government: Significant Challenges Ahead

The US Treasury recently released its 2009 report to Congress. The graph below says it all…:

Because of the severe economic downturn, instability in financial markets, and the policy
measures taken to help the economy recover, Fiscal Year (FY) 2009 brought substantial changes
to the financial position and condition of the U.S. Government. The budget deficit increased
from $455 billion in FY 2008 to $1.4 trillion in FY 2009, while net operating cost increased from
just over $1 trillion in FY 2008 to approximately $1.3 trillion.

…and more…

In light of the high unemployment rate and the devastating effects that unemployment has
on American families, the Government’s immediate focus is on encouraging private sector job
creation. But the Government must simultaneously address the medium- and long-term fiscal
imbalance resulting from past budget deficits, the impact of the economic downturn, and
demands on the nation’s social programs, notably Medicare, Medicaid, and Social Security. As
currently structured, the Government’s fiscal path cannot be sustained indefinitely and would,
over time, dramatically increase the Government’s budget deficit and debt (see Chart 2).

Source

Kenneth Rogoff: The U.S. has been in ‘default’ before…and there is no reason why it won’t have problems again.