Tags: Zuckerman | Fix | Debt | Face | US | Decline | economy

Zuckerman: Fix the Debt or Face US Decline

Monday, 09 May 2011 09:29 AM

Real estate mogul and publisher Mortimer Zuckerman warns that Congress must step up and take the budget crisis seriously or all Americans will pay the price.

The chairman and editor in chief of U.S. News & World Report and publisher of the New York Daily News told an audience at New York’s Manhattan Institute that spending would have to halt, and soon.

“The budget can no longer be a perpetual motion machine for new spending on new programs for new needs on top of those we already can’t afford,” Zuckerman said.

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Mort Zuckerman
(Getty Images photo)
The deficit, the gap between taxes collected and federal spending in one year, is expected to top $1.4 trillion this year. Meanwhile, the long-term debt, most in the form of Treasurys, is bumping up against a $14.3 trillion ceiling imposed by Congress.

A vote is needed soon to increase that ceiling. If it fails, the implication of that the U.S. can no longer borrow and could conceivably default on its existing debt. A bond selloff might follow, which would push interest rates much higher, much faster than the Federal Reserve could possibly manage.

Treasury has asked for a $2 trillion increase in the debt ceiling to punt the issue out past Election Day 2012. Meanwhile, Vice President Joe Biden has been tapped to step in between sparring Democrats and Republicans to find a fix for the budget that will allow government to continue operating for now.

The entire discussion misses the point, in Zuckerman’s view. The biggest problem facing the economy is not just the debt but official unwillingness to take it seriously, he said.

“There are two warning signs of a budget crisis: rising debt and the loss of confidence that the government will deal with it. This administration is fulfilling both conditions,” he said.

Nevertheless, the U.S. economy is in a better position than most would believe, Zuckerman explained. Compared to heavily indebted Europe, American is simply better in structural terms to create growth and solve its own problems.

“During the 1980s and 1990s, the United States created 73 million new private-sector jobs while shedding 44 million for a net job creation of 29 million jobs as we adjusted to global competition. By the end of those two decades, 55 percent of the workforce was in a new job,” he said.

“By contrast, continental Europe, with a larger economy and work force, created under five million new jobs during the same time period,” Zuckerman said.

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Real estate mogul and publisher Mortimer Zuckerman warns that Congress must step up and take the budget crisis seriously or all Americans will pay the price. The chairman and editor in chief of U.S. News World Report and publisher of the New York Daily News told an...
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