Check out this graph from the IMF:
Let’s break it down. On the x-axis, you have a measure of how much a country would have to change its spending in order to bring down the debt to a reasonable amount. I believe for the purposes of their calculations, for a developed country it’s about 60% of GDP. Countries further to the right have the most cuts to make to spending in order to get the debt under control.
On the y-axis, you have a measure of how much a country can expect its spending to increase because of health and pension increases (think Medicare and Social Security). Countries closer to the top of the graph will have higher increases in spending because of their projected costs in these areas.
Do you know where you absolutely do not want to be? The upper right corner. That’s where a country would be if it both had the most cuts needed and the most anticipated spending in health and an aging population. It’s a perfect storm.
Can you guess where the US is?
I hear more and more people talking about the size of the debt and the increases in spending. None of them are talking seriously about Medicare or SSI spending, or how we might cover them. Wake me when they do.
(h/t The Economist)
