Denninger: Fix the Budget Now, or we Fail

KD:  The budget deficit has to be brought negative, and this means a cut in federal spending by 50%.
Which, incidentally, only takes spending back to 2000 levels.
We don’t have a choice folks, and we have to do it now. 
We must get rid of fully half of all federal spending and we must run a primary budget surplus including all off-balance sheet items such as Social Security and Medicare.
I know nobody wants to hear it, but that doesn’t matter.  It has to happen.  If it doesn’t, and there’s no evidence that it will, then at some time well before the 2020 line is reached the market will come to the conclusion that we will not fix the problems. 
On the day that happens yields will ratchet and the spiral – the last one – will begin.

No matter what happens on the political front, the arithmetic can not be negotiated or ignored.

If politicians do not immediately fix the spending curve, it will be fixed by reality.

When that happens, every worst nightmare becomes inevitable.

Read Karl’s piece here.



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