Tags: Roubini | US | Debt | Problem | Under | Control

Roubini: US Debt Problem Is Under Control

By Dan Weil   |   Thursday, 21 Apr 2011 09:12 AM

The warning from Standard & Poor’s that it may have to downgrade the U.S. government’s triple-A credit rating if substantial progress isn’t made on the budget deficit soon sent many investors into a tizzy. Stocks briefly plummeted in response.

But market guru Nouriel Roubini wasn’t impressed. Despite the fact that the budget deficit totals around 10 percent of GDP and the government debt burden about 100 percent, our fiscal affairs aren’t in dire straits, he says.

“The United States has the most manageable fiscal issues of any major advanced economy, because federal, state and local revenues as a share of GDP (about 24 percent) are very low for cyclical and other reasons,” he and Roubini Global Economics colleague Arnab Das write in a note to clients obtained by Business Insider.

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Nouriel Roubini
(Getty photo)
“Therefore, fiscal balance can be restored by fiscal adjustment without major economic difficulty in the near term,” they argue.

To be sure, the two seem to be saying it’s tax increases that will solve the debt problem, and raising taxes isn’t particularly high on the agenda of the Republican-controlled House.

Roubini isn’t the only one skeptical about S&P’s warning. A former top official at the Treasury Department told Moneynews.com that S&P’s report amounts to nothing more than “a publicity stunt.”

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The warning from Standard Poor s that it may have to downgrade the U.S. government s triple-A credit rating if substantial progress isn t made on the budget deficit soon sent many investors into a tizzy. Stocks briefly plummeted in response. But market guru Nouriel...
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