Tags: Stockman | fiscal | crisis | debt

David Stockman: 'Fiscal Crisis Coming Down Road'

Friday, 06 Sep 2013 08:14 AM

By Dan Weil

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The U.S. economy remains weak, and the government is headed for a fiscal meltdown, says former White House budget director David Stockman.

The economy grew 2.5 percent in the second quarter.

But, "when I look at trends, I don't see any kind of [economic] recovery that's sustainable. Industrial production is barely where it was in the fall of 2007, full-time jobs are still down 8 percent and median family income is down 8 percent," he told CNBC and Yahoo's Talking Numbers.

Editor’s Note:
Obama’s Budget Takes Aim at Retired Americans

"So we have very little progress."

Slow economic growth in China, Japan and Europe provides another headwind for our own economy, Stockman explained.

And then there's the government's debt burden — more than $16 trillion. "We have an enormous fiscal crisis coming down the road," Stockman stated.

"This thing isn't in remission. It's only temporarily abated. So I don't see the case that there's blue sky ahead."

A few weeks from now, when Washington is finished fighting over Syria, "we'll be right up to the midnight hour on the debt ceiling," Stockman said. Treasury Secretary Jacob Lew has warned that the $16.7 trillion limit will be reached in mid-October.

"We're going to be in another crisis and paralysis. Maybe we'll even breach the [debt] ceiling," Stockman said.

"The market seems to play the world one day at a time and I think there's going to be a moment of shock and reckoning," he added.

Given the uncertainty over the debt limit issue at this point, it's difficult to advise investors on what they should do about it, Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott, told The Wall Street Journal.

"That also makes it very difficult for the market to price in any potential risk," he said.

Editor’s Note: Obama’s Budget Takes Aim at Retired Americans

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