The Grecian tipping point

Here's Megan McArdle in this month's Atlantic magazine: "Deficits matter"

Unfortunately, we’re now running annual deficits at a level where deficits very much do matter - as the ongoing crisis in Greece so vividly illustrates. The Congressional Budget Office says that after borrowing nearly 10 percent of GDP in 2009, we will borrow even more in 2010, and just a little less in 2011. Thereafter, we’re expected to cut our deficits - but they’ll still be 4 to 5 percent, which is bigger than anything we saw under George W. Bush and bigger than all but two of the deficits tallied under Reagan. The bills for Medicare and Social Security are finally coming due as the obligations exceed payroll-tax receipts. And this administration, like every administration before it, is unwilling to either make the necessary cuts or raise the necessary taxes. Deficits are starting to matter. A lot. Both politically and
economically.
Policy makers are acting as if we have plenty of time to figure things out, but as the Greek experience illustrates, debt crises do not always unfold slowly, with plenty of warning.

And now the CBO has officially decided that Megan is right. Here's a summary via Reason: "Mounting U.S. debt makes fiscal crisis more likely." And then there's the CBO Director's blog giving us a dark glimpse into the future:

Options for responding to a fiscal crisis would be limited and unattractive. The government would need to undertake some combination of three actions. One action could be changing the terms of its existing debt. This would make it difficult and costly to borrow in the future. A second action could be adopting an inflationary monetary policy by increasing the supply of money. However, this approach would have negative consequences for both the economy and future budget deficits. A third action could be implementing an austerity program of spending cuts and tax increases. Such budgetary adjustments, in the face of a fiscal crisis, would be more drastic and painful than those that would have been necessary had the adjustments come sooner.

Hey, we're broke, let's go on The View!