United States and Britain about the economic difficulties currently facing: the collapse of the real estate and credit bubble, the weak economy, high unemployment, monetary policy is also used in the limit of zero interest rates, growing budget deficit. U.S. budget deficit this year is 9.5% of GDP, the UK is 11%. U.S. Treasury close to 100% of GDP, the UK and more than 70%.

Since the economic crisis in the United States has been lax in the implementation of Keynesian fiscal policy to stimulate effective demand, with government consumption and investment spending to replace the deficiency, trying to maintain a stable aggregate demand. One look at this for two years, Obama following the 2009 launch of 800 billion U.S. dollars of the recovery plan, and in 2010 an additional 350 billion U.S. dollars of stimulus.

As Keynes has set the home country of the British press as if he was John Maynard Keynes, or even the opposite, vigorously expand the fiscal austerity program. British finance minister announced on October 20 Osborne, the British government will cut spending 130 billion U.S. dollars, 50 million over four years to eliminate government positions, the retirement age from 65 to 66 years of age and so on. Goal is to reduce the fiscal deficit within five years of 2% of GDP. Very harsh words of the British finance minister: “British collapse”, “lost control of the deficit, we will hear from the foreign instigation”, “We have no other choice.”

In other words, the United States in the management of effective demand, the British in the management of financial balance.

Perhaps the UK is subject to the general tightening in the euro area affected by the atmosphere, but also closely follow the situation some. But the British euro-zone countries with different: the latter subject to the single euro currency, there is no independent monetary policy, issuing currency can not adjust the exchange rate to affect the liability; and the United Kingdom is more similar to the U.S., is an independent currency, an independent policy country methods to solve the national debt can be more flexible since, without emulation.

But the British still feel deeply that the fear of a huge budget deficit and national debt. Unforgiving financial markets, once aware of the potential of a country debt difficulties, and rallied together to suppress the action, then the consequences could be disastrous. Greece’s debt crisis in the UK is entirely possible recurrence, once a hot topic. Britain itself has experienced several sterling crisis. In 1976, the British financial mess, investors lost confidence in the pound sterling depreciated sharply, and finally rely on borrowing £ 2.3 billion from the IMF was through. In 1992, the British pound plunges, was expelled from the European Exchange Rate Mechanism at the time, and finally spent tens of billions of pounds worth of reserves to support the pound suffered heavy losses. So now, even though many prominent U.S. politicians and economists at great length against the British policy of austerity, “unwise,” “gambling,” the UK economy will lead to “worse”, “second recession”, the British government still decided to “lesser of two evils lesser “solve the deficit first.

In fact, the financial position of the United States better than where to go, perhaps even more difficult. Only the United States is now running a “long throw into confusion must first security short,” the policy of first use of deficit financing to alleviate the urgent short-term economic malaise, sooner or later go back to deal with long-term budget deficit.

The crucial point of the U.S. budget deficit is due to two internal structural elements: medical insurance and social security. These two projects as the population aging and rising health care costs were increasing state. Congressional Budget Office forecasts, the government health care spending in the next 25 years to double GDP, a serious cost overruns. In social security, the more people receiving Social Security benefits, while the contribution of others decreased. Currently, one in five people aged 25-64 to support a retiree aged 65 or above; but in 2030, this ratio becomes 3 to 1, is to maintain social security is a problem. At the state level, state government employee pension and health insurance is a big burden. Has predicted that spending on pensions alone, up to 2 trillion U.S. dollars, while the health care expenditures will reach 600 billion U.S. dollars. Therefore, huge fiscal deficits and long-term threat to the United States is clear, real.

In 2008, still before the economic recession, a U.S. think tank structure money to shoot a documentary, “the debt the United States,” specifically describe the severity of the debt problems of the United States, calling the whole nation vigilant, take measures as soon as possible, regain their existing policies to address the treatment good bond with the increasing proportion of GDP can not continue forever-dimensional time bomb.

Now to plan ahead, focus on long-term financial situation, plan long-term adjustment and preparation, not only for long-term economic and financial stability useful for short-term economic situation will have improved: to increase confidence in the economic environment, increased consumption and investment expenditures, and promote capital formation, and promote economic recovery.

On the contrary, if the United States to take “ostrich policy” out of sight for the net, or into a political deadlock and drift, and that sooner or later the debt time bomb that will one day explode. That day may be at any sudden, rapid impact and disruption caused. Then, rather reluctantly, accepted without approval, can only passively accept the fact, painful adjustment and shock, involuntarily to face financial crisis, financial crisis, and even the overall economic crisis, serious consequences.

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