For U.S. Economy, Short-Term Good News Is Bad News

For U.S. Economy, Short-Term Good News Is Bad News

It is now conventional wisdom that the U.S. faces an acute fiscal calamity. America’s problems are severe: a deficit that is more than 10% of GDP and total debt that is more than 70% of GDP. But all evidence suggests that the U.S. does not face an immediate crisis. Take a look at the simplest indicator: the day that Standard & Poor’s raised its now famous warnings, the markets decided to lower America’s borrowing costs, and the dollar rose against its principal alternative, the euro. In fact, the real problem for America may well be that it does not face a short-term crisis.

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