The U.S. situation, according to Mintz, is not unlike what Canada faced in the mid-1990s.
In the 1990s, Canada's net debt to GDP ratio was close to 75 per cent - while the U.S. is sitting at 80 per cent right now. The crisis number - which is where Italy and Greece both are - is 100 per cent.
The solution, as most Canadians know too well, was spending cuts instituted by the Liberal government at all levels, which also caused fiscal drag as a result of public sector and government employees being laid-off.
No one, however, is going to quibble with the result: Canada remains on a strong financial footing compared to most jurisdictions around the world. The key, says Mintz, is to ensure the focus on whittling down existing deficits is not lost so that if another financial crisis erupts Canada will be able to weather another
What is Richardson's prescription for what ails the U.S.?
A combination of spending cuts and higher taxes through tax reform.
And while the notion of increasing taxes remains an anathema to Republicans, especially those of the Tea Party variety, Richardson's analysis shows if the government is to balance the budget by only decreasing spending, it would have to drop spending by 30 per cent. This is clearly out of the realm of possibility.
