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Will The Debt Bomb Detonate Before We Defuse It?

Stanford graduate students working with David Walker find that the U.S. is running out of time to fix our debt problem. They say we have three years at the most. But it's not all bad news; they give examples of countries that fixed their debt problems.

From CNN:

The recent debate to prevent a government shutdown reminds us that partisan politics have always been, and will likely always be, part of Washington. While it is certainly good a shutdown was averted, the $38 billion in cuts that were part of the deal barely dent our nation's growing debt.

Now, the $14 trillion question is whether President Barack Obama, House Speaker John Boehner and Senate Majority Leader Harry Reid can reach another agreement -- this time to reduce our debt and improve our fiscal responsibility.

We certainly hope they can. However, time for an agreement is fleeting. In fact, the evidence suggests the U.S. is becoming less fiscally responsible.

Over the last six months, as part of our graduate programs at Stanford University, and in conjunction with former U.S. Comptroller General David Walker (a longtime critic of unsustainable entitlement spending) and the Comeback America Initiative, we developed a Sovereign Fiscal Responsibility Index (PDF) that assesses fiscal responsibility across most Organization for Economic Cooperation and Development and so-called BRIC countries (Brazil, Russia, India and China).

Combining the three major components of fiscal responsibility -- current debt levels, the projected future debt path and fiscal governance -- this index predicts the U.S. could face a fiscal crisis in the next two to three years if spending and tax revenues continue at current levels. More here.

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