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Presentation slides / report excerpt
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1.9 MB
Summary
This document consists of two presentation slides from a KPCB (Kleiner Perkins) report titled 'USA Inc. | Consequences of Inaction,' dated circa July 2010. The slides analyze the negative consequences of high government debt levels, citing the Congressional Budget Office, and present a case study on European austerity measures in Greece, Ireland, Spain, and Portugal following the 2009 financial crisis. The document bears a 'HOUSE_OVERSIGHT_021054' Bates stamp, indicating it was part of evidence collected during a House Oversight Committee investigation.
Key Quotes (3)
"While High Government Debt Levels Could Hasten Economic Recovery Post Recession, There Are Many Long-Term Negative Consequences"Source
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Quote #1
"Lessons Learned: For Countries Burdened by High Debt Levels, Austerity Measures are Necessary"Source
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Quote #2
"Investors may lose confidence in government’s ability to repay debt & interest without causing inflation."Source
HOUSE_OVERSIGHT_021054.jpg
Quote #3
Full Extracted Text
Complete text extracted from the document (2,305 characters)
While High Government Debt Levels Could Hasten Economic Recovery Post Recession, There Are Many Long-Term Negative Consequences
• Crowding Out Investment -> Lower Output & Income
- A growing portion of people’s savings would be diverted to purchase government debt rather than toward investment in productive capital goods.
- A growing portion of people’s savings would be diverted to purchase government debt rather than toward investment in productive capital goods.
• Higher Interest Payments -> Higher Tax Rates & Lower Output & Income
- Government may be forced to raise marginal tax rates and / or reduce spending on other programs to meet interest payments.
- Government may be forced to raise marginal tax rates and / or reduce spending on other programs to meet interest payments.
• Reduced Ability to Borrow -> Less Policy Flexibility
- In case of economic downturns or international crises, government may not be able to raise substantially more debt.
- In case of economic downturns or international crises, government may not be able to raise substantially more debt.
• Increased Chance of Sudden Fiscal Crisis -> Social / Economic Disruption
- Investors may lose confidence in government’s ability to repay debt & interest without causing inflation.
- Investors may lose confidence in government’s ability to repay debt & interest without causing inflation.
KP CB www.kpcb.com
Source: Congressional Budget Office, “Federal Debt and the Risk of a Fiscal Crisis.” 7/10.
USA Inc. | Consequences of Inaction 425
Source: Congressional Budget Office, “Federal Debt and the Risk of a Fiscal Crisis.” 7/10.
USA Inc. | Consequences of Inaction 425
Lessons Learned: For Countries Burdened by High Debt Levels, Austerity Measures are Necessary
[Table Columns: 2009 Deficit as % of GDP | Gross Debt as % of GDP | 2009-2010 Austerity Measures | New Revenue Streams]
Greece
14% | 113%
• Wage freeze & bonus cut of 14% on all public sector employees
• Reduction in government contract workers
• 11% reduction in pensions & Increase in retirement age to 65 from 58
• Joint IMF–EU bailout of $146B
• Tax increases for VAT (+2%) / fuel / alcohol / cigarette (+10%)
• Clamp down on tax evasion
14% | 113%
• Wage freeze & bonus cut of 14% on all public sector employees
• Reduction in government contract workers
• 11% reduction in pensions & Increase in retirement age to 65 from 58
• Joint IMF–EU bailout of $146B
• Tax increases for VAT (+2%) / fuel / alcohol / cigarette (+10%)
• Clamp down on tax evasion
Ireland
11% | 66%
• 5-15% pay cut & 4% benefit reduction for all public sector employees
• $1.5B+ broad spending cuts in healthcare & infrastructure
• Carbon tax on fuel
• 1% tax rise on personal income about 120K euros
11% | 66%
• 5-15% pay cut & 4% benefit reduction for all public sector employees
• $1.5B+ broad spending cuts in healthcare & infrastructure
• Carbon tax on fuel
• 1% tax rise on personal income about 120K euros
Spain
11% | 54%
• Hiring freeze for public sectors
• Increase of retirement age to 67 from 60
• Sold $7B in new bonds
11% | 54%
• Hiring freeze for public sectors
• Increase of retirement age to 67 from 60
• Sold $7B in new bonds
Portugal
9% | 78%
• Total budget cut of $70B 10-13E
• Wage freeze on all public sector employees
• Reduce state payroll via attrition
• 50% bonus tax on top bank executives
• Privatize state-owned industries
9% | 78%
• Total budget cut of $70B 10-13E
• Wage freeze on all public sector employees
• Reduce state payroll via attrition
• 50% bonus tax on top bank executives
• Privatize state-owned industries
KP CB www.kpcb.com
Source: Eurostat, European Commission, IMF, New York Times, Financial Times, BBC, Wall Street Journal.
USA Inc. | Consequences of Inaction 426
Source: Eurostat, European Commission, IMF, New York Times, Financial Times, BBC, Wall Street Journal.
USA Inc. | Consequences of Inaction 426
HOUSE_OVERSIGHT_021054
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