The United States of Bananaland

From the Davos economic meeting amid news that Moody's is considering dropping the USA's AAA rating....

This week, the White House forecast a $1,565bn budget deficit for 2010, which represents 10.6 per cent of gross domestic product and is the highest such ratio of debt to GDP since the second world war.

While the budget gap is forecast to fall to about 4 per cent by 2013, it is based in part on economic growth not falling below government expectations, Congress agreeing to tax rises and a spending freeze on non-security discretionary spending.

Crucially, projections of the overall debt-to-GDP ratio for the US are seen rising from 53 per cent in 2009 to 73 per cent in 2015 and 77 per cent by 2020.

Moody's, however, says this understates the overall US debt level.

"Using the general government measure, including state and local governments as well as the federal government, which is used internationally, this ratio would be well over 100 per cent in 2020."

At the heart of investor concerns is whether countries such as the US with its rising debt burdens has the political will, or the sense of consensus, to take decisive measures to cut debt.

Some investors at Davos suggested it might be helpful if the credit rating agencies were to step up their threats about a potential future downgrade in countries such as the US and UK, since it would force politicians to act - and turn the issue into an election topic.

And then...

House faces tough vote on $1.9 trillion more debt

Facing a politically excruciating vote, House Democratic leaders are counting on new budget deficit curbs to help smooth the way for a bill allowing the government to go $1.9 trillion deeper into debt over the next year - or about $6,000 more for every U.S. resident.

The debt measure set for a House vote Thursday would raise the cap on federal borrowing to $14.3 trillion. That's enough to keep Congress from having to vote again before the November elections on an issue that is feeding a sense among voters that the government is spending too much and putting future generations under a mountain of debt to do it.

Already, the accumulated debt amounts to $40,000 per person. And the debt is increasingly held by foreign nations such as China.

Passage of the bill would send it to President Barack Obama, who will sign it to avoid a first-ever, market-rattling default on U.S. obligations. Democrats barely passed it through the Senate last week over a unanimous "no" vote from GOP members present.

Someone has to finally JUST SAY NO. It's beyond political. It's IMPOSSIBLE

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